More handpicked essays just for you.
Techniques of cost accounting
Advantages and disadvantages of cost accounting
Budgeting as a tool to control and manage operations
Don’t take our word for it - see why 10 million students trust us with their essay needs.
The overall purpose of cost accounting is to advise top administration and the management team on the most suitable and cost effective methods and actions to employ based on cost, capability and efficiencies of a given product or service. It can be defined as the method where all the expenditures used during execution of business activities are gathered, categorized, examined and noted down (Horngren & Srikant, 2000). Once these numbers are gathered and recorded the information is used to determine a selling price and/or to identify possible investment opportunities. Although the principal aim or function of cost accounting is to help the business administration with their decision making and business planning process, the cost accounting data …show more content…
In its current practice, the roles and functions of cost accounting includes additional functions. More specifically, it can be described as more than an inventory tracking system. This is because cost accounting entails defining the charges of activities and goods (Horngren & Srikant, 2000). Because of its many roles and functions, this accounting method has been of great help to growth and expansion of business planning and management. Again, the reports offer assistance in the planning and growth projections for different business functions and units within the organization. The information cost accountants offer different uses, some of which aid in the controllership function, as well as the industrial …show more content…
As such, there is material cost regulator, manufacturing control, labor cost regulator, excellence control and so on. Conversely, control over the price is implemented through the methods of financial control and typical costing (Meigs, 1998). The control methods aid the management in understanding the operating competence of a firm. Cost accounting also determines the selling price. The intention of all business firms is minimizing costs and maximizing profits. The costs incurred in producing goods and services may be reduced through incorporating alternate but cheaper resources of
An organization costing system is a system that helps the management with the strategy planning while the system plays an important role in providing accurate cost information about the products and customers (Curtin, 2006). UPS utilizes the Activity-Based Costing (ABC) system. ABC assumes that activities cause costs and that cost objects create the demand for activities (Marx, 2009). The key to cost allocation under ABC is to identify the activities that are performed to provide a particular service and then aggregate the costs of the activities (Gapenski, 2012). This is a marked departure from the practice of sharing overheads costs equally or overheads becoming part of the overall profit-loss estimate instead of component product pricing (Nayab, 2011).
Even though a myriad of tools and techniques learnt in the Strategic Cost Management and Strategic Business Analysis courses are not fully exploited in this essay, it is generally recognised that those techniques are useful for a corporate to formulate strategy, do strategic planning, control costing and quality, as well as eventually elevate its values, regardless the nature and size of organizations.
Management accounting in organisation is very important for decision-making and to make the business more efficient and therefore increasing its profits. Is the process of preparing accounts that can help managers to make day-to-day and short-term decisions, by providing them with accurate and timely key financial and statistical information...
This, in order to identify what are the true costs of each customer and each order, enables the company to fully understand its cost structure thereby providing the base for better business choices and higher profitability. These are very sensible goals indeed. Even though the company is profitable, implementing a new, activity-based cost accounting system will allow the company to improve its margins and become even more focused and competitive in the future. 2.2. What is the difference between a.... ...
"College Accounting Coach." Process Costing-Definitions And Features(Part1) « Process Costing « Cost Accounting «. Feb. 2007. Web
Rishinek, A., 1983. Control Aspects of Standard Costing: Variance Analysis, Inflation Adjustment, The Learning Curve and their Computer Applications. Managerial Finance, 9(1), pp. 14-18.
Cost accounting is the “measuring, analyzing and reporting of financial and nonfinancial information relating to the costs of acquiring or using resources in an organization.” (Horngren, Datar, Rajan, 2012). There are many different methods available to determine the cost of each various stage or product involved in producing a cost object, this paper will explore the differences and similarities between job costing and process costing.
ABC LTD COMPREHENSIVE INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2012 NOTE 2012 Revenue 2 828,500 Cost of sales 3 (460,000) Gross profit 368,500 Other income 4 2,500 Operating expenses 5 361000 Profit before income tax 10000 Income tax expense (30%) 3,000 Profit for the year 7000 Other comprehensive income change in revaulation surplus 38500 Other comprehensive income for the year, net of tax 38500 Total comprehensive income for the year 45500 ABC LTD STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2012 NOTES 2012 ASSETS Current assets Cash and cash equivalents 6 100500 Trade and other receivables 7 45,200 Inventories 8 87700 Other current assets 9 7000
Activity-based costing (ABC) is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore “fixed” as well as variable costs. Activity-based costing is mostly used for internal decision making and managing activities while traditional costing method is used to provide data for external financial reports. Most organization uses activity-based costing as an addition system for using traditional absorption costing as sometimes the traditional cost system misleads the product’s profitability. In a company, there are many products on sale, if one product is sold at a high price with low product margin and a product with high product margin at a low price, it may result in a loss. In addition, due to the reason that cost drivers and enterprises business may change, activity-based costing analysis also needs to be revised periodically. This amendment should be prompted to change pricing, product, customer focus and market share strategy to improve corporate profitability.
Subsequent to obtaining the accounting information, managerial accountants will then proceed to use it to plan, evaluate the company performance and also control the business operations. With regards to planning, the managers are required to make decisions concerning the kind of product to introduce into the market, when to introduce the product and where the production should take place. In performance evaluation, individual product lin...
It is recognised that appropriate cost accounting information is important for successful management of an industry whether it is large or small (European Commission-Enterp...
Managerial accounting has historical antecedents that stretch back to the beginning of the 1900s. Whether it was called cost accounting, or industrial accounting, or administrative accounting it is certain that concerns regarding production cost calculation, expenses’ classification and analysis, resource consumption administration, and pre and post cost calculations, have existed since the beginning of the 90s (Cardos & Cardos, 2010).
In management accounting, cost management has a crucial role and finds its foundations in understanding “cost behaviour”. “Cost behaviour analysis” can be defined as “the study of how cost changes when there is a change in an organisation’s level of activity”. (Definition https://www.accountingcoach.com/blog/what-is-cost-behavior).
3. The factors that affect the cost management are competition, growth in the same industry as the company, and improvements in manufacturing technology.
Businesses operate for the wealth of shareholders. Whether it provides goods or services, the aim is to make a profit by adding value. Nowadays these processes are closely monitored and controlled by the management accountants to ensure the highest return possible. Nevertheless, traditional budgeting and costing techniques are sufficient, but as the business environment changes, the demand for management accountant’s role become contentious.