An accounting professional requires at least two skill sets. The first is to be technically competent....

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Accounting

An accounting professional requires at least two skill sets. Thefirst is to be technically competent. Knowing how to capture,manage, and report information is a necessary skill. Second, theability to assess manager and employee actions and biases foraccounting analysis is another skill. For instance, knowing how aperson is compensated helps anticipate information biases. Draw onthese skills and write a one-half page memo to the financialofficer on the following practice of allocating overhead.
Background: Assume that your company sells portable housing toboth general contractors and the government. It sells jobs tocontractors on a bid basis. A contractor asks for three bids fromdifferent manufacturers. The combination of low bid and highquality wins the job. However, jobs sold to the government are bidon a cost-plus basis. This means price is determined by adding allcosts plus a profit based on cost at a specified percent, such as10%. You observe that the amount of overhead allocated togovernment jobs is higher than that allocated to contract jobs.These allocations concern you and motivate your memo.

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AnswerApproach of ingestion costing applies overheads on volume basedcost drivers for example machine hours or work hours Yet withheadway in innovation and present day fabricating conditionrequires an arrangement of costing in which overhead should beconnected on movement based cost drivers this implies overheads areconnected to the items based on the See Answer

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An accounting professional requires at least two skill sets. Thefirst is to be technically competent. Knowing how to capture,manage, and report information is a necessary skill. Second, theability to assess manager and employee actions and biases foraccounting analysis is another skill. For instance, knowing how aperson is compensated helps anticipate information biases. Draw onthese skills and write a one-half page memo to the financialofficer on the following practice of allocating overhead.Background: Assume that your company sells portable housing toboth general contractors and the government. It sells jobs tocontractors on a bid basis. A contractor asks for three bids fromdifferent manufacturers. The combination of low bid and highquality wins the job. However, jobs sold to the government are bidon a cost-plus basis. This means price is determined by adding allcosts plus a profit based on cost at a specified percent, such as10%. You observe that the amount of overhead allocated togovernment jobs is higher than that allocated to contract jobs.These allocations concern you and motivate your memo.