Role of Cost Accounting and Ethical Consideration

The total cost of production of Sony’s new product is the addition of both fixed and variable costs. Fixed costs are assets within a business that are not used up or sold during the typical production course e.g. buildings and machinery. Variable costs are costs that fluctuate in time with the production output or sales revenue of a company such as Sony e.g. raw material and labour costs. Figure 1.1 shows how the total cost is composed of both fixed and variable costs.

Theoretical Perspectives Decision Making Framework is suitable to making ethical decisions. According to Bonde & Firenze (2013) the decision about right or wrong can be difficult and might be related to individual context. Ethical thinking other than critical thinking is needed in order to find the most suitable alternatives to be implemented in reaching the expected

According to this method, every unit of the product is assigned all direct, fixed, and variable costs. This method includes the cost of direct materials and labor as well as a portion of the overhead costs associated with it in the final costing of every unit of the product.

One of the goals of education is to apply skills learnt in classroom to real world through one's critical thinking. However, there must be ethical code and guidelines to help resolve ethical concerns. This requires a deep knowledge of ethical decision making steps. These steps come from the ethical commitment to reach an effective ethical decision making (Fisher, 2013). The following is a synopsis of three cases selected for applying ethical decision making steps.

The author was able to provide a detailed aspect of variable costing with clear emphasis on the importance of variable costing. According to the author, differentiating between fixed and variable costs is the first step in controlling costs. The article is helpful in understanding cost relationship and its correlation to cost absorption in manufacturing

For instance, a business that uses the variable costing approach allows the management to analyze the actual production costs, and this allows controlling costs since one can identify the differences between the actual and budgeted amounts. Additionally, through variable costing the management focuses on controlling costs to establish better cost control practices. It is easier to control the variable production costs compared to fixed production costs, and the appropriate level of management then makes

Another important point is the reporting to whom. Financial accounting is meant for external reporting to all who are interested in the company’s activities. But in management accounting it is altogether an internal reporting aimed at helping managers in discharging their responsibilities.

Businesses, investors, creditors rely on accounting ethics. The accounting profession requires honesty, consistency with industry standards, and compliance with laws and regulations. The ethics increase the responsibility and integrity of accounting professionals, and public trust. The ethical requirements influence the management behavior and decision-making. The financial scandal of Enron and Arthur Anderson demonstrates the failure of fundamental ethical framework, such as off-balance sheet transactions, misrepresentation of financial statements, inaccurate disclosure, manipulations with earnings, etc. The confronted accounting profession and concern for ethics in businesses forced regulators to revise the conceptual framework of accounting processes.

Cost control – if costs are not measured by a company then their profits will be adversely affected, therefore budgeting is one way to control cost as it gives an business an

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.).

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.

All the costs by a company can be broken into two categories, fixed costs and variable costs. Costs that are independent of output are called fixed costs. Fixed costs remain constant throughout the relevant range and are usually considered sunk for the relevant range. Buildings and machinery are included inputs that cannot be adjusted in the short term. They are only fixed in relation to the quantity of production for a certain time period. The cost of all inputs is variable, in the long run.

In determining the fixed costs per unit for the period for absorption costing (not needed for variable costing since the entire fixed cost is expensed as a cost of the month, not a cost of units), you spread the fixed costs across all the units made. Since production was increased substantially, the fixed cost per unit was reduced:

Management accounting was first known as cost accounting. This origin was reflected in the earlier title for practitioners of cost or works accountants (Wilson and Chua, 1988). Accounting historians have long endorsed the view that cost accounting is a product of the industrial revolution (Johnson, 1981). For example (Wilson and Chua, 1993) claimed that cost accounting was practiced by the mechanized, multi process, cotton textile factories that appeared in England and United States around 1800. This point of view was consistent with Garner (1947) who pointed out that cost accounting had emerged only after eighteenth century as a

Measuring cost behavior enables cost accountants to understand and quantify how an institution’s activities impact its costs. The information obtained from the cost accountants could be used by managers to make plausible decisions such as evaluating strategic and operational improvement programs, making appropriate short-term pricing and operating decisions, and planning and budgeting on the