the cost accounting assignment help

the cost accounting assignment help

The Importance of Cost Accounting in Business

1. Introduction to Cost Accounting

The history of cost accounting has been marked by a search on the part of manufacturers for accurate and relevant control and financial information. In the 1840s, product cost quality managers communicated product ranges of quality to cost managers, and unit cost increases were reviewed in terms of their predictable causes. Over the past 60 years, the field has made significant contributions to manufacturing practice by providing controller managers and company owners with reports detailing the over and under cost of actual designated plans and designs. Cost accounting enables owner managers in small companies to evaluate certain influences on product unit cost. They must have a set of financial facts to estimate each possible price mark-up while still operating above their product’s minimum viable selling price.

Cost accounting has always been about more than just helping managers figure out which product lines are winners and which products are losers. It’s about giving key managers the information they need to make good decisions and getting everyone to pull together. When it is detailed and timely, it gives managers the information they need to perform the three tasks of management: planning, leadership, and control. It reflects the company’s management planning and decisions about its cost system, production processes, organizational costs, relationships of introducing new products, and advertising current products. Cost accounting increases unit costs accurately trended over time. These increases should be reviewed on the basis of their predictable causes before they become unmanageable patterns of increased that wreak havoc and underbid competitors.

2. Benefits of Cost Accounting

Nicholson Daud explained three ways companies can raise performance in the Operations Management: (1) Develop the company’s operations strategy; (2) Create products that compete in the market; and (3) Synchronize the products with market demand. Market share can be obtained when the product meets market requirements; however, the product only competes in the market when it is designed so that production costs, the objective of the Cost Accounting area, are competitive. The second benefit that a company reaches through the cost account is that cost recovery is constant. Nicolao L’ Dalla, a University of Buenos Aires college professor, professor in the Professional Reservation Extension, indicates the level of costs that must be covered by the price.

In this part, the three basic benefits of cost accounting can be analyzed: (a) Products at costs that are competitive; (b) maintain a product’s cost recovery; and (c) design a high-performance cost accounting. First, a product only has success in the market if its cost is competitive. The American Productivity and Quality Center (APQC) report, The Cost of Quality, authors David T. Hirschstein and James B. Martin, affirm that minimizing production costs is a fundamental requirement for global competition. This statement is accurate since it comes from the long experience North American companies have facing global competitors.

3. Methods and Techniques of Cost Accounting

The expansion of the results of the analysis also requires the extension of the accounting elements used. Cost accounting becomes necessary when there is a need to establish synthetic indicators based on elements of costs and average costs. This requires an adaptation in the classification of accounts, the methods of valuation, and the grouping arrangements. Cost accounting introduces into general accounting and contributes to increasing the accuracy of costs and prices. The first is achieved by the use of average costs joined by presumptions or by a technique of unit pricing operation. The second is achieved by providing information useful and desirable for prices between partners, collaborators, customers, suppliers, etc. The management of each business enterprise seeks to combine various techniques of cost determination that allow them to keep a contingent situation somewhat under control in terms of general operating results and to consolidate a strategy based on plans governed by methods, techniques, and elements of correct determination of the costs. In this regard, at the management level, elements and operating methods with differing degrees of accuracy concur: classification of costs, procedures for fixing cost centers and their cost, cost element calculation systems, indicators based on the relationship needs / cost, methods of cost management, etc.

To ensure the accounting of costs in each office of the enterprise, in order to be able to exercise meaningful control or for control purposes by sector, every office, sales point, store, warehouse, for example, should have their own detailed accounting records. These records classify and quantify the consumptions realized in the enterprise, corresponding to the accounting of the produced goods. All other accounts related to the full cost are affected by this accounting. The accuracy of their accounting is examined to verify the accuracy of the recorded costs. Their accuracy is examined in the opposite conclusion, based on the costs that the economic system generally recognizes as reliable costs.

4. Challenges and Solutions in Cost Accounting

What is often intended as “general” costs, i.e., factory overhead costs, tries to become “specific” and attributable in different ways to the different final outcomes. This generates a continuous stream of accounting problems that must necessarily be solved with more imputation criteria, such as hours of manpower available. The criticisms of “misuse”, or at least of “non-optimal” use, of cost accounting do not promote commercial success, but the vagueness of these sections on costs as direct imputation criteria at very low prices, which only appear due to drastic reductions in operating margins due to vindictive pricing strategies of large customers. In the absence of other certainty, there is no suspicion of a strong organizational worth, and there is no doubt as well that it would be much less expensive than a continuous personal negotiation on the prices of each individual order in those “upward” of scarce success.

Problems often start with the classification of costs, in which not every resource is recognized. Linked to this is the proper way of recording costs in the accounting system. Only then would it be possible to address another subject: the standardization of cost centers, as well as the mode of the distribution of overhead. A further conceptual maze can be found in the distinction between expenses and costs, which is very elusive in cases where a certain use of resources is declared free. Preparing a cost breakdown, including data on notional or imputed costs, contributes to further clarify the problem of the separation of different resources among fixed and variable costs. However, in cost accounting, the usual problem of treating all resources in the same way or the large number of “hidden” costs that often represent a significant share of total costs with the progress of technology, is rarely addressed. Finally, there is still a concept not at all clear in the use of maximum flexibility in economic management: the marginal costs.

5. Conclusion and Recommendations

Cost directors in both the private and public sectors, such as industries, require accurate and reliable information on cost in order to enable them to match the available resources with identified projects and programs. It is due to this that special emphasis is placed on the importance of cost accounting. It is noted that in order to ensure worthy and judicious management of public and private funds or resources, a query panel is needed to question the allocation, utilization, and monitoring of the benefits of the management of the involved resources. To drive the importance of cost accounting home, it is necessary to properly strategize the situation of our condition. The paper therefore emphasizes the primary goals of a civil or revenue manager level in order to put efforts to achieve its set goals in an organization. This work also espouses the difference between cost control and cost reduction, pointing out the most important as relevant to the role of the cost accounting information system and the management responsibilities required in order to ensure that the goals are achieved.

1.3 Conclusion

The need for the survival and growth of an organization cannot be overemphasized. Many organizations have embarked on various cost reduction and controlling measures in the past. The achievements of these attempts have indicated different results. This is not unconnected to the fact that many departments do not appreciate the importance of proper record keeping. These days, the changes in the business world are very fast and many and cost accounting are growing in their complexity and working environment. The importance attached to cost accounting as an information system has made it relevant for accountants and their desire to identify themselves with the activities of the business organizations. In view of this, the researcher has chosen this topic, the importance of cost accounting to every organization may be seen as irrelevant because of its prime objective as considered by many writers and legal pronouncement of the purpose of every business to make a profit. It is important that, since the prime objective of a cost accounting system in any profit-oriented organization is the control of cost, managers have many tools by which they can often control this.

Profit-making organizations are set up with the ultimate aim of creating wealth and also contributing to society. In order for these organizations to achieve their goals, they must be guided by some plans and objectives, and there must be an effective and efficient system in operation. The most important factors that influence organizational effectiveness and efficiency are getting the right information at the right times, analyzing and reporting, and implementing the right decisions when necessary. The resources of any organization, i.e. men, machines, and money, must also receive priority attention, especially when it comes to cost, i.e. spending money profitably is very important.