subject: How To Properly Workout Unicap [print this page] The methodology or rule by which cost segregation is being done on both direct as well as indirect costs which is sustained during the overall valuation of property is called as Unicap. Unicap (Uniform Capitalization) is also a federal rule by which whatever inventories are being including under different Cost segregation services should be tangible property and should contain both tangible as well as intangible personal property and different forms of declared assets or assets improvements as shown by your taxpayers. The workout of Unicap varies from industry to industry whether your taxpayers are a construction company or a leading manufacturer or builder or any other production public or private firm. Tax collectors use the simplified Cost segregation services methodology and familiar methods for working out the total Unicap costs.
There are different ways in which Unicap can be workout. These are as follows:
* Provision of mixing Cost segregation with Production: The provision is being made simply by evaluating the total mixing cost segregation which falls under the taxable period. This Mixed cost segregation comply the total output incurred by the entire organization whether it is from production unit or non-production unit. Once the Cost segregation is being made it is then evaluated with the related Cost segregation services or other support services. If you are a tax collector you must refer to different IRS guidelines to get the required details of different Cost segregation to included in the form of mixed Cost;
* Production Cost: Once the Cost segregation is being included in the mixed Cost the next process would be totaling of both direct and indirect production Cost that is being incurred during the taxable period. After totaling of the production value this Cost segregation should then being declared as inventory by excluding the mixed cost segregation along with the total interest accrued and then should be included onto Section 236A cost book. If any problem persists you may again look back into your different IRS guidelines, for help;
* Net total Cost: The next step would be the calculation of net total value incurred during the current financial year by totaling both production and non production value. From this net total of production and non production Cost exclude the mixed Cost segregation services. Non-Production Cost are related to all those Cost which dont have any link with the direct productions at all;
* Calculation of Mixed Cost segregation service Cost: The mixed Cost segregation service Cost is being calculated by dividing the total production Cost by the total Cost incurred throughout the financial year. Then the total mixed cost segregation value is being multiplied with the resulted quotient;
* Additional Production Cost: Then, calculate the additional production Cost simply by adding mixed Cost segregation services value with the indirect Cost allocated for production. This calculation of indirect value is being calculated according to the accounting principles which vary from company to company;
* Absorption Ratio: The calculation of additional production value using the absorption ratio by multiplying the absorption ratio with the total inventory cost at the end;
* Grand Total: At the end, the grand total is being calculated by subtracting the capitalized amount from the total additional production cost and then the final cost is being included in total Cost of sold goods.
