Final answer:
In cost allocation for an operational asset, fixed cost, useful life, and residual value must be established. These factors contribute to calculating depreciation and influence financial decisions related to asset utilization and profitability.
Step-by-step explanation:
For the process of cost allocation on an operational asset, three factors must be established at the time the asset is put into use. Firstly, it is necessary to determine the fixed cost, which includes the expenditure for fixed inputs that do not change based on production levels. Secondly, the useful life of the asset needs to be estimated, as it will impact the periodic allocation of the asset's cost over its useful life. Thirdly, the residual value or salvage value of the asset at the end of its useful life must be considered, which is the estimated amount that the asset will be worth after it has been fully utilized.
These three factors are essential for calculating depreciation and for businesses to understand the relationship between production and costs, which plays a crucial role in making informed decisions regarding profitability and the efficient use of capital goods. They are also closely tied to the concept that every factor of production has a corresponding factor price, which directly influences the cost-benefit analysis of using the asset.