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PMMBnJTYACCOlimG: A Useful Tool for the Defense Contactor by James V. Mitchell Defense contractors probably have more requirements and uses for efficient accounting systems than any other industry. The complexity of the organizations and products of the large contractors presents a real challenge for developing meaningful cost accumulation and internal financial reporting. Many companies have the latest in modern data processing equipment and techniques to create information, yet have a mass of separate systems for various purposes and an account structure and reporting system that is addressed to the requirements of outsiders. There is a lack of integration between systems and a subjugation of what should be the primary goal of an information system — developing data for management control. The dependency of sales price on cost identification through cost reimbursement contracts has placed the emphasis of these companies' accounting systems on contract cost accumulation. Historically the accumulation of overhead, research, marketing, and other indirect costs has been pointed toward the method used to allocate or apportion these costs to contracts. Usually these categories of accumulation have no alignment with cost responsibility nor have these distribution pools lent much insight into die behavioral characteristics of the costs involved. Typically the members of this industry have looked upon themselves as being in a unique situation, perhaps more so than in most industries. This is probably caused by the conditions that exist in dealing with a military customer, even though many large contractors also have a substantial portion of commercial business. Then too, a number of companies have tried over a period of years some of the widely used accounting techniques on a separate system basis, but have experienced difficulties in making them work under these conditions. The influence of dealing with the government The long-standing habit of having the military customer look over your shoulder into your books has substantially influenced the approach of these companies to their accounting systems. Cost reimbursement contracts have always been subject to government audit. Also, subcontracts on prime cost reimbursement contracts are subject to audit by the prime contractor who has the responsi- 22 THE QUARTERLY
Object Description
Title |
Profitability accounting: A useful tool for the defense contractor |
Author |
Mitchell, James V. |
Subject |
Defense contracts -- United States -- Accounting |
Personal Name |
Mitchell, James V. |
Portrait |
Mitchell, James V. |
Office/Department |
Touche, Ross, Bailey & Smart. Seattle Office |
Citation |
Quarterly, Vol. 10, no. 3 (1964, September), p. 22-27 |
Date-Issued | 1964 |
Source | Originally published by: Touche, Ross, Bailey & Smart |
Rights | Copyright and permission to republish held by: Deloitte |
Type | Text |
Format | PDF image with OCR under text, scanned at 400dpi |
Collection | Deloitte Digital Collection |
Digital Publisher | University of Mississippi. Digital Accounting Collection |
Date-Digitally Created | 2009 |
Language | eng |
Identifier | Quarterly_1964_September-p22-27 |