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Essay / Research Paper Abstract
This 3 page paper looks at the way costs may be allocated to departments and how this may impact on the reported performance. An example using PepsiCo is presented, with the use of sample figures to show how the department and bottom line are impacted by different allocations approaches. The bibliography cites 2 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEcostallo.rtf
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Unformatted sample text from the term paper:
2004). This is true of many forms; one example is that pf PepsiCo a firm that has a wide range of interests, selling diversified range of products with a focus
on the food and beverage market. The firm has a number of common costs; these include costs such as the administrative costs incurred by head office managing the different brands
and facilities, which include costs such as utilities and wages that are not directly involved in the creation of any products. However, these costs need to be paid and as
such they will usually be allocated to the different departments so that they bear a fair share of their use of resources. PepsiCo, online with many other large organisations,
does not make their costing allocations public; as such we will have to make some assumptions regarding these costs when assessing the potential impacts of the way that they are
allocated. To consider this the example of head office costs will be used, these will be assumed to be $1 million that are incurred for the management of the
different departments each month, here we will assume that there are three division; beverages, snacks foods and cereals. There are different ways that the costs may be allocated, they may
be slit equally between the three departments, or it is more likely that there will be some attempt to allocate the costs to reflect the resources that are used by
each department. Here we will assume that the allocation is based on the level of revenue generated by each department. Here we will assume the sales figures and the cost
of goods that are used for the gross profit margin are assumed to be 53.5% which is the current gross profit margin for the firm as a whole. The way
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