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Determining The Role Played By Cost Accounting For Success Of Businesses

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Cost accounting 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). The data collected is then reviewed to reach a selling price or identify where investments are possible. The principal aim of cost accounting is advising the top administration or the top management on the most suitable method of action based on the cost capability and efficiency. Cost accounting offers the comprehensive cost information that assist the business regulate the present business operations and also enabling in future business plan. Since managers are supposed to make resolutions for their own firms, there is no need for the data…show more content…
Cost accounting has been of great help to the business management because of various roles it plays. The information cost accountants offer different uses, some of which aid in the controllership function, as well as the industrial role. Firstly, cost accounting is useful in estimating costs and in setting prices of various products. In businesses where the cost of a good is grounded upon its estimated cost, cost accounting does a very significant use in making sure that a correct approximate is prepared (Meigs, 1998). Labor hours and essential materials are usually provided by engineering. Cost accounting uses these data and adds predicted disparities grounded upon historical performance of related goods to get a selling price. Cost accounting also utilizes labor degrees, taking into concern expected inflationary issues resulting from fluctuations in the economy (Foster & Baxendale, 2013). Cost accounting plays a vital role in helping the leadership of an organization make important decisions on a number of issues that include:
Buying or renting equipment that is of value to the company. Retaining or making a replacement on the machine that is in use.
Proceeding with operations or winding up the business operations.
Accepting orders at a lower cost (Rginean, 2013).
Cost accounting provides a means of determining the unused time and the turnover (Foster &
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