Can I have an original answer that has not been used for Cost Accounting? The ma

Question

Can I have an original answer that has not been used for Cost Accounting?

The manager of an operating department just received a cost report and has made the following comment with respect to the costs allocated from one of the service departments: “This charge to my division doesn’t seem right. The service center installed equipment with more capacity than our division requires. Most of the service department costs are fixed, but we seem to be allocated more costs in periods when other departments use less. We are paying for the excess capacity of other departments when other departments cut their usage levels.” How could this manager’s problem be solved?

“Preparing a budget is a waste of time. The strategic plan is what we work to accomplish.” How would you respond to this comment?

Explanation / Answer

The manager of the operating department could solve this problem by watching closely of the cost expense and making the necessary changes needed. As I was reading in the text the dual-rate method would be a good system to use. With the dual-rate the fixed and variable costs are allocated using different allocation bases. This seems the best solution to this problem.

“Preparing a budget is a waste of time. The strategic plan is what we work to accomplish.” How would you respond to this comment?

ans= I would definitely disagree that budgets are a waste of time. A strategic plan is veryuseful to a business to know what steps to take in order to reach their goals as a business,but that cannot be accomplished until you know where the business is right now andprepare a budget to reach those goals. Without prepared budgets, you cannot know if youare making your budgeted goals. I think budgets and a strategic plan work hand-in-handbut you cannot have a strategic plan without a budget

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