Importance of Cost/Managment Accounting for Stakeholders of Mncs

1550 Words Aug 23rd, 2011 7 Pages
The following essay explains the importance of cost accounting for stakeholders of Multinational Companies, particularly the shareholders & the customers.
Who are the stakeholders of an organization? according to (Freeman 1984) stakeholder is “any group or individual who can affect or is affected by the achievement of the firm’s objectives” going by this definition stakeholders of a company would include lenders, creditors, customers, shareholders, government, media, political groups, local charities etc. The main focus of this essay will be on shareholders and customers. A company cannot plan a strategy on to just focus on increasing shareholder value or just focus on customers, neither one leads to the other automatically.
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Determining individual costs is very essential to the running of all kinds of businesses.
The term allocation and apportionment of costs are sometimes used interchangeably in some countries but according to (CIMA) assigning of a cost to a single cost unit or cost centre is known as cost allocation and assigning of indirect cost or overheads to two or more units of costs is known as cost apportionment.

Various methods of determining and allocating costs are used by businesses some of which are referred as traditional costing systems which include direct costing & absorption costing. (Drury)’ traditional costing systems were developed in the early 1900s and are still in use businesses today.’
In direct costing method only direct costs are assigned to cost objects, supporters of direct costing argue that only direct costs can be traced accurately to a cost object and hence they provide a true assessment of the cost since indirect costs cannot be exclusively traced to a cost object therefore should not be assigned to a cost object.

(Drury): Another traditional method used is known as absorption costing which takes in to account both direct & indirect costs when assigning costs to cost objects, Supporters of absorption costing say that indirect costs should not be ignored because when

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