Cost Assignments In A Managerial Accounting Contract Logging Context

Abstract

This case describes a firm where the controller is planning to use his expertise in accounting for company-owned timber to consider logging on a contract basis for others. To develop the contract strategy, the controller must understand the firm’s costs so that he can prepare competitive bids and provide an adequate profit margin. This case requires students to engage in the first steps of developing a cost management system for a contracting situation. Students must: (1) identify management’s information needs, (2) identify cost objects, (3) identify appropriate costs to assign to cost objects, (4) identify potential allocation bases for indirect costs, and (5) describe cost behavior.