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McDonald's Corporation: Recasting Unallocated Costs - Essay Example

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McDonald's Corporation: Recasting Unallocated Costs

The researcher of this paper talks about one the most widely used technique to apportion the costs among various departments and units of production on the basis of activity of the firm. This method has removed any discrepancy that the previous accounting methods have and now because of this method we have been able to comply with the accounting principle of “PRUDENCE”. In this paper the researcher has crafted a strategy how McDonalds, which is one of the biggest fast-food chain, could use this method in their financial statement and how could they use this method to effectively calculate the cost of each product. In the end the researcher also has concluded that this method will be very useful for the company in apportioning overheads among various different products that McDonald’s outlets sell. The overheads that McDonald restaurants incur are telephone bill, security costs, electricity bill and wages. It is also stated that since all businesses apportion these overheads on the basis of past data, there are chances that in a certain month these apportions are under-estimated or overstated. If these apportions are over-estimated it is a good thing and increase the company’s profit on the ground that it has managed to use its resources efficiently. However, if these estimates are under-estimated then the company has to allocate these costs elsewhere. These are usually included in the item of unrecognized losses or material wastage. They present a loss to the company and decrease the profitability of McDonalds Corporation. ...Show more
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Summary

This essay focuses on the discussion about one the most widely used technique, that is aimed to conduct an apportionment of the costs, among various departments of the McDonald's Corporation and units of production on the basis of activity of the company. …
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McDonalds Corporation: Recasting Unallocated Costs
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