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

Question

An accounting professional requires at least two skill sets. The first is to be technically competent. Knowing how to capture, manage, and report information is a necessary skill. Second, the ability to assess manager and employee actions and biases for accounting analysis is another skill. For instance, knowing how a person is compensated helps anticipate information biases. Draw on these skills and write a half-page memo to the financial officer on the following practice of allocating overhead.

Background: Assume that your company sells portable housing to both general contractors and the government. It sells jobs to contractors on a bid basis. A contractor asks for three bids from different manufacturers. The combination of low bid and high quality wins the job. However, jobs sold to the government are bid on a cost-plus basis. This means price is determined by adding all costs plus a profit based on cost at a specified percent, such as 10%. You observe that the amount of overhead allocated to government jobs is higher than that allocated to contract jobs. These allocations concern you and motivate your memo.

Explanation / Answer

Hi

The capturing of accounting information and analyse it properly is very important in our profession. We have to classify the information on the basis of above analysis. Recording the transaction based on our judgement and in stict adherence with accounting standards and policy ensure the true and fair accounting. We have to be very carefull in cost classification and analysis. Accounting is not just recording of a transactions incured in past. The accounting information is the key for decision making. The financial data provided by our team is the basis of formulation of company policy strategy and plan of action. We have to palns for future and actions to accomplish. Winning a bid is vital for our company. If we bid at high price we will loose that opportunity. If we bid at low price who will finance the loss ?. So the information provided to be accurate then onlyb we can take right decision. Please go through company policy. Also please review overheads allocated to governement jobs and contract jobs. Make sure that cost allocation is done with proper care and professional judgement.

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