Costs refer to the expenses incurred while an organization carries out activities such as the provision of services or production of goods. Costs can either be incurred in paying the workers who perform the duties involved in providing services or in purchasing materials required in the provision of such services. In the case of Oak City, costs refer to the amount of money charged by the city in providing services within the police jurisdiction. The central issue in the Oak City Case is the determination of costs. The case also encompasses the costs relating to services such as police and fire (Ingram, Parsons, and Robbins, 1998).
One of the methods that the city can use in determining the cost of providing services is job costing. With the use of this method, the city can determine the cost of each of the services offered. Based on the costs incurred, the city can then determine the amount to be charged. The other method is service costing; using this method, Oak City will determine the cost of providing services to the public and businesses within the police jurisdiction. Another costing method is the accrual method that looks into the incomes earned and the expenditure incurred (Ingram, Parsons, and Robbins, 1998).
Oak City uses the accrual basis of accounting; this method takes into consideration the expenditures incurred and the revenues generated. The city uses this method to make estimates with regard to revenues that may be recorded. The method used is fair since it takes into consideration the services provided by the city (Ingram, Parsons & Robbins, 1998). The method is in accordance with the state law since it does not violate the legal requirements of providing services within the police jurisdiction.
According to Anita, she has paid extra business fees to the city, starting in 1994. Her argument is that the city should pay her the excess amounts she has already incurred. I support her position since the city should charge fees according to the services provided. Anita’s company seems to be outside the police jurisdiction of the city; as such, she should not be paying excess fees. In my analysis, the costs to be charged to the businesses within the police jurisdiction should not be fixed. A business should only pay for the services provided by the city. However, this approach may violate state laws (Ingram, Parsons, and Robbins, 1998).
The city has not been charging high fees to businesses within the police jurisdictions. The police jurisdictions (introduced in 1988) aim at providing essential services to the citizens at a cost they can afford. As stated by state law, the city has an obligation to offer services to the people and businesses within the police jurisdiction. The costs charged by the city for the services provided are fair. However, the charges should be related to the extent of services provided by the city to businesses. The plaintiff’s position is not desirable to emulate as it may make the city incur extra costs in providing services (Ingram, Parsons, and Robbins, 1998).
There are some ethical issues that an accountant should consider in the case of Oak City. One of the ethical issues includes reporting the transactions correctly; therefore, accountants should never give in to pressure from their seniors. Accountants should not mislead their clients; at times, they should support the positions given by their clients, especially when the clients give the right information.
Reference
Ingram, R. W., Parsons, W. C., & Robbins, W. A. (1998). Instructional Case: Oak City’s Cost Allocation and Determination. Issues in Accounting Education, 13(1), 157-165.