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cost allocation in small business - Research Paper Example
Finance & Accounting
Pages 4 (1004 words)
COST ALLOCATION IN SMALL BUSINESSES [Your name goes here] [Your class name goes here] [Your college name] Cost Allocation in Small Businesses Cost allocation is basically a process in which costs of services are identified and assigned to operate any particular business activity…
Cost allocation through a proper accounting system is considered an important task in every small business. The process of cost allocation needs a company to allocate costs in such a way that cost covers all business components properly. Costs can be allocated does not cover any single aspect of a business, rather it covers multiple areas which incur some expenses. Cost allocation has a number of considerable benefits for small businesses. Let us discuss some of those benefits in order to understand the worth of this process. Awareness of Expenses One of the main benefits that companies get through proper cost allocation is awareness of expenses. Accurate assignment of costs to business processes makes it possible for the managers to know exactly the types of expenses incurred in any particular business operation. Here, it needs to be mentioned that such information is not just critical for the development of operating budgets; rather it is also imperative in the calculation of taxes payable to state, local, and federal tax agencies. The way a company assigns costs to different business units have a profound impact on the amount of taxes that the company pays (Tatum, n.d.). ...
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