Cost and Reasonable Rental Value

1992 WordsOct 15, 20068 Pages
I. Purposes of the Brief This brief amicus curiae does not address the merits of the predatory pricing allegation against BuyGasCo Corporation ("BuyGasCo"). It speaks only to the nature of the cost accounting system that we, as students of accounting, think to be appropriate for addressing the issues presented by cases of this general type. We offer our views on this subject out of concern about the allocation of indirect costs used in assessing the appropriate gasoline cost value in State of Florida v. BuyGasCo Corporation, 2003-05143 (D. FL. 2003). We regard the allocation system employed in that opinion to be inconsistent with systems in common practice. Use of that system has a potential adverse effect on both the motor fuel…show more content…
This system is often imprecise as it distributes costs on the basis of a single variable when there are typically several factors involved, particularly when there are multiple end-products sold. To address this imprecision, we offer a refined costing system which reduces the use of generalized averages in the allocation of costs. In general, this is accomplished by first dividing the indirect costs into homogeneous pools so that we can more appropriately distribute them. Second, these cost pools are allocated on the basis of the driver of that cost segment which ensures that costs are more accurately tied to their source. Thus, a refined costing system is preferable as it ultimately delivers a more correct cause-and-effect relationship between costs and their sources. Although this system is preferable, it has some disadvantages. First, refined costing systems require more information about the nature of the costs involved, and often gathering this information results in additional costs for the firm. Second, even with a broad range of data available, some averaging and estimations are still necessary. So, without outside motivation, such as the MFMPA, small firms retain simple costing systems. IV. Dr. Humboldt 's Refined Costing System In his analysis for the Defendant, Dr J. T. Humboldt proposed BuyGasCo adopt a

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