Our new owner wants to change our cost accounting for our manufacturing facility to only include the cost of materials. I know this is not an accurate way to cost not to mention the legality with the IRS. I am sure they would produce a figure at the end of the tax year to plug in but this doesn't provide a clear picture of the 300 plus products we make. Can anyone provide some advice on how I can convince the new owner that this is not the way to proceed?

If all the other costs that your new owner is not including in product costs are eventually included in total costs of sales to calculate taxable income, the IRS will probably be OK.

Try presenting your new owner with some costing models i.e. standard costing, average costing etc., which include fixed costs and other allocated costs. Explain that these costing models are in compliance with GAAP (generally accepted accounting principles). Bring along your sources. Some good accounting books on costing might do the trick. Don't expect your new owner to read these books. summarize the costing information contained in these books down into a concise and brief presentation. The IRS also has information on how product costs should be reported. Go on the IRS site and find the applicable publication(s) that cover this subject.

Good luck

Good luck