Cost Accounting Proposal for a new online business unit

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Learning Team Cost Accounting Proposal Part 2

Your team has been asked to present a proposal to management for developing a cost accounting system for the new online business unit of a merchandising company. Your final system must contain features designed to support the ability of both the new online business unit and the parent unit to measure the performance of the new business. When the project is implemented, your team will help develop the organizational strategy and manage the accounting control/cost systems needed for success.

a. Compare and contrast various approaches to benchmarking for business planning and control and recommend an approach for the new online business unit.400-500 words

A system, whether automated or manual, that comprises people, machines, and/or methods organized to collect, process, transmit, and disseminate data that represent user information.

Accounting is the means by which information about an enterprise is communicated and, thus, is sometimes called the language of business. Costs, prices, sales volume, profits, and return on investment are all accounting measurements. Many different users have need for accounting information in order to make important decisions. These users include investors, creditors, management, governmental agencies, labor unions, and others. Because the primary role of accounting information is to provide useful information for decision-making purposes, it is sometimes referred to as a means to an end, with the end being the decision that is helped by the availability of accounting information. The main function of accounting system is to:
? Provides information primarily to people outside the company
? Provides information that would be helpful in attracting:
? Useful to those making investment and credit decisions, who have a reasonable understanding of business and economic activities.
? Helpful to present and potential investors, creditors, other users in assessing the amount, timing, and uncertainty of future cash flows.
? Provides information about economic resources

We will have system to take care of following needs:

Management accounting Department/Finance Department
They require information for studying the relations between fixed costs, variable costs and profits. Break-even analysis helps in determining the point at which sales will just cover total costs or the breakeven point for a product is the point where total revenue received equals total costs (TR=TC). By having some variable and some fixed costs, the firm must suffer losses up to a given volume. They require information which can be used to make advantageous decisions concerning rates, prices, effect on operating costs and profits. Break-even analysis is especially useful when considering volume and plant expansion. If the firm is to avoid losses, its sales must cover all costs?those that vary directly with production and those that do not change as production levels change.
(Khan & Jain, 2004)

Thus it seeks information to provide answers to the following questions:
1. What sales volume is necessary to produce an X amount of operating profit?
2. What will be the operating profit or loss at X sales volume be.
3. What will be the effect on operating profit be if the company's fixed costs have increased or sales mix have been changed.
4. What sales volume is needed to achieve the budgeted profit or to cover the additional fixed charges from the proposed new project?
The reports may be product basis or to a specific order basis. It will be used periodically like every month.

Finance department
Financial management means efficiently managing the various resources of the company. Financial management is concerned with value maximization. Management's efforts are for increasing the value of the company for the shareholders. This requires investing in projects that are likely to provide positive returns to the company. Under financial management following important decisions are taken;
? Investment or Long Term Asset Mix Decision
? Financing or Capital Mix Decision
? Dividend or Profit Allocation Decision
? Liquidity or Short Term Asset Mix Decision
Thus they will require relevant information for taking the above decisions.

Operations
They will require information on:
? Efficiency and Effectiveness of operations of the department. Efficiency is the relationship between input and output. Thus they will require information on inputs and outputs. Effectiveness is ensuring about meeting the objectives.
? Resources and Utilization: Data regarding the use of fixed assets and resources will be required to measure the performance. Cost and budget performances are common examples.
(Govindrajan, Management Control system)
There will be comparison with the previous year. This report can be made monthly.

Marketing DEPARTMENT
They will require ...