In The World Of Accounting, Cost Accounting Serves As Managers

1472 WordsFeb 7, 20176 Pages
In the world of accounting, cost accounting serves as managers go to system for cost information. As previously mentioned, cost accounting is a specialized subset of accounting that collects, determines, classifies, and interpret the cost of products or services. In addition, the concepts of cost accounting are to account for the incurrence and control of cost and measure the operating efficiency of a company on a periodical basis. “Cost accounting, as defined here, deals with the rest when, and if, such measurement helps management drive the organization to work better and cost less.” (Geiger, 1995, pg. ). Hence, cost accounting provides management with substantial, compelling, and relevant data that they can use to make firm and…show more content…
The primary methods of cost accounting include activity-based costing (ABC), performance measures method, and the standard accounting method and each method involves different processes, measurement capabilities, cost benefits, and potential costing issues, companies experience. Activity-based costing (ABC) Method While analyzing how companies within the service industry utilize activity-based cost (ABC), Onat, Anitsal, & Anitsal, (2014), stated that “Activity-based costing (ABC) focuses on the idea that activities create costs, while products use activities to gain value added.” (pg. 150). In general, this means that the theory behind activity-based costing (ABC) method is that merchandises or services consume activities and activities consume resources. When used, activity based costing first recognizes key activities that create overhead costs. Secondly, the activities that have similar cost drivers are then categorized into cost pools, and finally allocates the total overhead costs for products and services by computing absorption rate of each cost pool, respectively. Some issues associated with activity-based costing (ABC) is that it is expensive to implement and data can easily be misrepresented. One of the critical issue company encounter while utilizing the activity-based costing method is that it is difficult to separate some overhead costs the CEO of the company
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