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 &
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.
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.
Chapters 10 (pp. 396-405) & 16 (pp. 646-651) Cost Accounting: a managerial emphasis (Horngren et al.)
Would factory security and assembly activities be best classified at an appliance manufacturing plant as unit-level, batch-level, product-level, or organization-sustaining?
Costing system is the most important part for any business or engineering company. Cost accounting is necessary for a company to be able to exercise control over the actual costs incurred compared with planned expenditure. From the point of view of cost control, a costing system should not only be able to identify any costs that are running out of control but should also provide a tool that can assist in determining the action that is required to doing right things.
One of the basic parts of cost accounting is to gauge the cost of tangible or intangible product or service. All costing models are attempting to discover the "correct" cost 1.e actual cost without any cost variances for all cost objects, for example, product, profit, segment, and division. costing methodologies all over the world apportion overhead by utilizing volume- driven measure, for example, unit transformed to first gauge a foreordained overhead rate then assign overhead by applying this normal overhead rate to the cost object. Requisition of such models is authentic for offices generating goods with less differing qualities. In any case, as manufactured goods differ, the wide averaging methodology prompts severe cost variations
Cost accounting is not a solution to management problems. It is a management tool designed to provide information that facilitates sound decisions. The two primary objectives of cost accounting are 1) to match cost with revenue and 2) to match resource consumption with the units of service provided.
Sub Micron Devices started its operations in mind 1980s. The company was located in Phoenix, Arizona, and had 400
There are several ways that the enterprise can learn on the way to reduce their costs. The first being is reducing supply expenses by looking for quality vendors with competitive prices (Bryman & Bell,2015). It is important for any manufacturing business to cut down on their production costs. At the same time, it is vital that they do not in any way affect the quality of the products. Some of the leftovers can be sold rather than having them thrown out as trash or sold to recyclers. The production unit should always operate at optimum. It is fundamental to
Job Costing is an essential learning concept within cost accounting that is often overlooked in day-to-day operations by a large amount of professionals. For any business that plans on generating a profit from a specific project it must know how to effectively determine job costs. Job costing is comprised of the following three activities that relate to a specific job: materials, labor, and overhead. The materials sector of job costing has to do with gathering the costs of necessary elements and assigning costs to a direct product or project once it is used. Labor involved with job costing includes the time that an employee will dedicate to a project, then based on the amount of labor required an employee will be assigned to a job that
As corporate cost is the cost associate with Treasury cost, Human resource management cost. Acitivity based costing seeks to identify cost drivers that are directly link all the activities e.g. support activities and production activities to the product manufactured or service provided. The cost of all those activities are assigned to products or services via the activity cost driver, according to the each product relative consumption of these activities. Allocating corporate overheads based on the use of volume related cost driver alone can produce the misleading cost information such as inappropriate allocation can lead to faulty conclusions about the relative product profitability.
This examination paper comprises 6 pages Candidates should answer questions as follows: All questions should be answered. Show all major workings for your numerical calculations. The examination will be marked out of 100 marks. Question 1: 60 marks Question 2: 11 marks Question 3: 14 marks Question 4: 15 marks The following material is provided: Nil Use of calculators: Only calculators on the University of Otago list of approved calculators are permitted. (Subject to inspection by the examiners) Candidates are permitted copies of: One A4 (or smaller) sheet of paper that is
The third objective of cost accounting is to produce statements whenever is required by management. The financial statements are prepared under financial accounting generally once a year or half-year and are spaced too far with respect to time to meet the needs of management. In order to operate a business at a high level of efficiency, it is essential for management to have a frequent review of production, sales and operating results. Cost accounting provides daily, weekly or monthly volumes of units produced and accumulated costs with appropriate analysis. A developed cost accounting system provides immediate information regarding stock of raw
For any firm, it is very much critical and crucial for the accurate estimation of product costs in order for the operations to be profitable. It is very much essential for companies to know which products would actually generate profit for them which can only be found out by correct cost estimation. For such cost estimation companies adopt certain system basically known as a costing system or product system or a cost accounting system. Costing system (cost accounting system), can simply be understood as a system that can be adopted or used by a company or a firm for estimating the cost of their products (goods or services) so as to analyze profitability, valuation of