cost accounting assignment help online

cost accounting assignment help online

Cost Accounting: A Comprehensive Guide

1. Introduction to Cost Accounting

A company like General Motors makes cars. Other companies such as IBM and Apple Inc. deal more with services than products. In such companies, the product is an intangible element which cannot be counted physically; particularly this situation avoids the application of all manufacturing control systems in place for costing, as we are used to in the product area. However, many commercial activities also offer production services, mainly because they perform customization activities before the product is made available. In these activities, the product can be quantified (specific to a given consumer), have processes/operations required (product customization), and be transformed until it becomes the product ready to be sold to the final customer as desired by him, or would be ready if the customer had not rejected the product.

Cost accounting deals with the preparation of financial statements so that analysis can be made, with control of stocks, production costing, and estimation of costs, all directed towards providing the management with factual information as a piece of management accounting tool for planning and control of the organization. Another objective of the course is to train students so that they can contribute significant pieces of management accounting, customer profitability analysis, and customized product, instead of just maintaining the accounting records of an organization. In an organization, decision-makers can use cost accounting information to analyze costs of products, processes, and the costs of activities, and in many other ways. In some cases, cost accounting has an essential role in determining the competitiveness of organizations. The development size makes it more difficult to have a proper cost accounting system. Agribusiness firms have a high potential to reduce costs in their area.

2. Basic Concepts and Principles of Cost Accounting

Cost accounting is a form of financial accounting aimed at providing a detailed and practical working knowledge of the cost of things such as products and processes within an organization. This information is typically used by management for implementing and controlling day-to-day operations of the company. It is often said that the cost accountant’s role on operational issues has been enhanced by the corporate vision of being a cost leader, focusing on identifying and analyzing costs.

In principle, the purpose of cost accounting is to measure the value of the company’s goods, services, or processes. By measuring the value, management can identify, control, and analyze production efficiencies and financial elements. With a cost accounting system, manufacturers can ensure that production operations are running effectively and at the lowest possible cost.

In the initial stages of cost accounting, there are variations and detailed forms required to calculate costs in a factory, for example, that may produce a number of different products. Detailed manufacturing (or job order) cost records for each product must be maintained.

Cost accounting is the process of determining, recording, and analyzing costs that are related to operational and financial information. This includes the summarization of all the revenue and expenses recorded in connection with the actual production of the product in an organization. Cost accounting is used internally, meaning that it is used in the organization where goods are produced. It is different from financial accounting, which is used to report transactions periodically to outside parties.

3. Cost Accounting Methods and Techniques

The cost allocation method known as physical measures assigns a cost to a product based on the physical quantity either consumed or produced. For example, power might be assigned per kilowatt hour (kWh) of power consumed. Power often represents a large operating expense for grain elevators. To more accurately determine the power usage of each service (although consuming unequal amounts of power), a different physical measure that reflects actual use might be incorporated, such as drawn-out power consumption (MWh x kvar). The established consumption metering protocol will assist in arriving at a cost for each service based on actual usage. Milk procurement is also an example. The more liters produced, the lower the cost. Movement of feed and manure (which may become fertilizer costs) are often divided based on the quantity and/or distance transported. Transport, including vehicles and fuel, can also represent one of the key activities of commercial grain elevators. While a common allocation basis is distance traveled, this method may not accurately reflect the wear and tear that underlies the need for the expense, nor does it account for downtime spent at a site. A more effective basis for actual utilization, such as truck loads delivered, needs to be incorporated to improve the accuracy of the allocation for transport services.

A number of cost accounting methods and techniques can be used to allocate costs when price is unavailable. Generally, these methods fall under one of two broad categories: those that are based on physical measures such as weight, volume, or per unit of input, and those that rely on incorporation of best estimates derived from judgment and experience. This dividing line is not rigid, as some cost allocation methods use a combination of physical measures and best judgment. The most appropriate method for an individual situation will depend upon the specifics of the operation and the costs to be allocated.

4. Cost Analysis and Decision Making in Cost Accounting

Cost accounting is mainly based on cost data. The cost data is classified on various bases. The cost classification helps the decision-making authority to take several critical decisions in the manufacturing and control of the cost. These cost factors will largely influence the final decisions regarding the planning, operating strategies, and the costing, and these are all based on the cost accounting and cost data. The decisions so taken will also guide the management in the proper utilization of the business resources for achieving the maximum investment returns. The manager’s decision depends on the existing and expected costs in manufacturing and sales of the relevant product. Such data helps regulate the operating activities. Expenses incurred could be controlled by cost reports or statistics such as scrap reports, spoilage reports, idle time reports, finishing date reports, etc. for decision making to regulate and control the operating activities.

Robert N. Anthony described management accounting as “the accounting that is done to help the management in decision making.” The job of a manager does not end only by finding the financial results with the above accounting system, but he is also expected to take certain strategic and operational decisions by utilizing the financial cost data and the business resources optimally. It is also to be remembered here that the accounting data will not be able to influence the management without the cost analysis of the product. Hence, it becomes an integral part of the cost accounting.

5. Cost Accounting in Practice: Case Studies and Examples

For example, let us consider the cost of transportation. We have seen that there is a component tied to variable costs (the price of gas), a component dominated by fixed costs (the value of a truck), and components related to labor (wages of the driver) and wear and tear on the truck, among other things. Looking at it this way, the blends in the above example serve as a decent guideline for behavior at large. Basic economic theory tells us that if there is a solid need to have a truck on the road a certain number of miles every month (because of demand), trucking firms could justify their investment in the form of a fleet and a payroll. In essence, there should be a distribution of firms of different sizes, with the little legacies of Joseph Fergessen breaking away from the field in response to any given demand. This is exactly the pattern with America’s brokers of land transport.

While a full review of the methods and practice of cost accounting is beyond the scope of any book, some practical examples can add context to the previous discussions and show potential applications of certain cost accounting concepts. Whether you are a card-carrying or cardigan-wearing individual, such real-world examples can be helpful when implementing cost accounting methods. They can show you where the first-order results of such methods come from and serve as templates for your own work with numbers. Regardless of the nature of these examples and the motivations behind them, it is important to remember that when it comes to examples of cost accounting in action, the line between engineering and economics tends to blur.