Assigning costs and assets , Managerial Accounting

Assigning Costs and Assets

After identifying its value chain, a firm must assign operating activity and assets to value activities. Operating costs must be assigned to the activities in which they are incurred. Assets must be assigned to the activities which employ, control, or most influence their use. The assignment of operating costs is uncomplicated in principle, though it can be time-consuming. Accounting records must often be recast to match costs with value activities rather than with accounting classifications, particularly in areas such as overhead and purchased inputs. As assets are costly and their selection and use frequently involve tradeoffs with operating costs, assets should be allocated to value activities in some way that will allow an analysis of cost behavior. Assignment of assets to activities is more complicated than assignment of operating costs.

Posted Date: 12/8/2012 5:51:20 AM | Location : United States

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