Cost accounting is a process of recording, classifying, analyzing, summarizing allocating and evaluating various alternative courses of action and control of costs. Cost accounting involves the techniques for:
• Determining the costs of products, processes, projects, etc. in order to report the correct amounts on the financial statements, and
• Assisting management in making decisions and in the planning and control of an organization.
While cost accounting is often used within a company to aid in decision-making, financial accounting is what the outside investor community typically sees. Financial accounting is a different representation of costs and financial performance that includes a company's assets and liabilities. Cost accounting can
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It is a continuous effort to improve products, services, or processes, which require “incremental” improvement over time in order to increase the quality and efficiency of the process.
Lean management looks for different ways to eliminate factors that waste time, effort or money. This is achieved by analyzing a business process and then revising it or cropping out any steps that do not create value for consumers. Lean Management philosophy is based on the idea that organizations should set their strategies according to what the consumers really value, systematically eliminating waste both within the firm and along the process of supply chain. Many companies when implementing the Lean Management ideology complains that traditional Management Accounting Systems are unable to support their projects. At best, they are perceived as bureaucratic tasks, and at worst, they are considered a key constraint to both the acceptance and success of lean projects implemented in their organizations. The failure of these traditional Management Accounting tools and techniques has led to management consultancies in coming up with and developing a few range of Lean Accounting
According to Epstein and Buhovac, (2014), costing system is a process designed to monitor the costs incurred in a certain business. Costing systems are meant to advise the management on how to choose the most appropriate course of action with cost efficiency and capability. According to Cardinaels and Labro (2009) costing system provides detailed cost information needed by management needs to control current operations with the aim of improving the future. Below are some of the costing systems that are common to many organizations (Epstein & Buhovac, 2014).
Managerial accounting is essential for decision making. Making the best choice depends on the manager's goals, the anticipated results from each alternative, and the information available when the decision is made (Schneider, 2012). The different techniques associated with managerial accounting are very helpful in the decisions that need to be made. In order to truly understand decision making with managerial accounting one must first discern exactly what managerial accounting means and some of the techniques associated with it. The definition of managerial accounting will be discussed along with the techniques of cost management techniques, budgeting, and quality control.
“Lean is a systematic approach to identifying and eliminating waste (non-value-added activities) through continuous improvement by flowing the **product at the pull of the customer in pursuit of perfection.” Lockwood [24].
Cost measurement is the process of determining the dollar amount of direct materials, direct labor, and overhead that should be assigned to production. Cost accumulation is the process of associating costs with the units produced. Cost measurement is more about whether actual or estimated costs should be used, and cost assignment is about whether costs should be assigned to jobs or processes.
Cost accounting is a type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance (Cost Accounting, n.d.).
Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.
In cost accounting, the lack of understanding of the accounting and finance process by the business manager is an incentive for the unethical employee to manipulate the system. Ethics help management in: · Providing factual and true information to its users, · Determining the nominal price of its products, · Maintaining appropriate professional relationships, and · Maintaining efficacy In today?s world of corporate scandals, an appreciation of ethical standards and a commitment to the proper reporting and disclosure of financial information needs to be constantly reinforced within the area of accounting. Absorption and Variable Costing: Absorption Costing: All costs (fixed and variable) of production are product costs. Which means under absorption costing, both variable and fixed manufacturing costs are included as a part of the cost of the product manufactured.
The application and implementation of lean principles or thinking is a process that requires commitment from every stakeholder in the organization. This process entails commitment to the organization's workers and to the system itself in order to make changes towards improvement. Generally, the implementation of lean thinking is geared towards continuous improvement through the elimination of waste. However, lean management or implementation of the principles sometimes incorporate mistakes that are made by leaders in the execution process. This is mainly because lean leadership appears to be simple though its complex because of the costs associated with it. The mistakes usually occur because of intrinsic complexities of exploring deeply into organizational philosophies, business strategy, psychology, and macroeconomics.
This paper provides a critical analysis of several alternative cost systems to traditional cost accounting systems. It then evaluates these alternatives in terms of how they might support, or not, companies that adopt a lean philosophy. An example of nonfinancial performance indicators that support a lean philosophy is offered in Tables 1 and 2. This discussion in the article
Q1: Do the traditional accounting practices that the Topeka plant adopted in 1979 to support its mass production process have value in a lean environment? Explain the specific reasons that support your answer.
Costing systems are information systems that help companies determine the total production cost of the goods and services they produce over a period of time. There are two commonly used systems of costing companies apply to determine their total cost of production in relation to their revenue for a period. These are; the traditional or conventional system of costing, and activity-based costing (ABC). The method or system of costing to use depends on the needs of a company and its management decisions.
Cost and management accounting is an integral element in preparation of an entity’s financial reports. Cost accounting consists of various branches, including; job and process costing, absorption costing, traditional costing and activity based costing. An efficient costing system allows managers and other users of financial reports to make decisions to better the company, in reducing and streamlining costs, to improve overall profits. The way in which managers achieve this can be a rigorous and time consuming task, however, if a costing system can be perfected, productivity and general cost reduction can be achieved and an overall more efficient operation of the business will ensue. This essay will critically discuss factors in which a business consider in deciding on a costing system to implement and operate when establishing a costing system. In this article I will describe the different methods of costing, explain why I believe activity based costing is the most efficient method, and provide a real world example to support my claim.
Cost analysis is an important component of all economic evaluation techniques, especially when it comes to planning and self-assessment. Cost analysis is particularly useful for the following: planning and cost projections, assessing efficiency, assessing priorities, accountability, and assessing equity.