This change will free up significant resources in the finance department and wil
ID: 2710445 • Letter: T
Question
This change will free up significant resources in the finance department and will allow cost analysts to function more as business partners within the organization.” How you disagree and argue with this statement in two different ways? The change refers to changing to an actual cost system from a standard cost system. My initial thoughts were that it is not really the role of the finance department to a business partner giving ideas, but that didn't go very far. I feel like I am missing something...
Explanation / Answer
the key point in an actual costing system is that it only uses actual costs incurred and allocation bases experienced; it does not incorporate any budgeted amounts or standards. This is the simplest costing method available, requiring no pre-planning of standard costs. However, it can take longer to formulate a valuation for ending inventory and the cost of goods sold, since all actual costs must be compiled and allocated.
A similar costing system is normal costing, where the key difference is the use of a budgeted amount of overhead. Actual costing will result in a greater fluctuation in overhead allocations, since it is based on short-term costs that can unexpectedly spike or dip in size. Normal costing results in less fluctuation in overhead allocations, since it is based on long-term expectations for overhead costs.
from the above given points we can understand that it will help us to making things more easier & in simple way.