What are the different types of cost
accounting?
Cost
accounting is known as a method of accounting which aims to capture all the
expenses incurred during an accounting period. These costs are mainly captured during
the accounting period in order to facilitate the management in making correct
decisions. It mainly involves gathering, classifying and recording all the
outlays and expenses acquired which are afterwards summarised and analysed in
order to find the best selling price as well as determine where savings are
possible. You can get assignment help from My Assignment
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The
four main types of cost accounting are:
Standard cost accounting: This type of cost
accounting utilizes varied types of ratios in order to draw comparison of the
ways in which productive labor and resources are used. This type also determine
in ways it can be utilized in order to produce products and services in
standard conditions. However, one of the problems related to standard cost
accounting is that it mainly focuses on labor productivity while labor expenses
comprise of small ratio of costs in existing companies.
Activity based cost accounting- Activity-based
cost accounting is described as a method to the costing as well as regulation
of activities. These activities include tracking resource usage and costing
final production along with resources allocated to activities and activities to
cost objects as per consumption assessments. This type of cost accounting
mainly accrues the expenses from each unit and allocating them to particular
cost objects associated with goods, services as well as customers. Activity
based costing is seen to have higher level of accuracy and effective to
supervisors in assessing the costs as well as revenues of the goods and
services of the company.
Lean Accounting- This type of accounting is
related to an extension of the concept of lean manufacturing as well as
production developed by the Japanese business corporations. This type of
accounting put importance on value-based expenses as lean focused performance
measurements.
Marginal costing- This type of costing is also
known as value profit analysis. It mainly includes assessment of the
association between the goods, services, sales, volume, production amount,
revenues, costs and outlays. The association is considered as the contribution
margin which is estimated by deducting the variable expense from the profit. Further
the variable cost is divided by revenue. This calculation gives the management
an effective insight into likely revenues along with highly profitable sales
price as well as type of marketing which is essential. Get accounting
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In
cost accounting, money is considered as the financial aspect of production. On
the contrary, money is considered as the measure of financial performance in
financial accounting. Since, cost accounting is typically used as an internal
management tool; it does not follow any particular standards. It also differs
from one corporation to the other.
What are the functions of cost accounting?
Ascertainment of
cost-
Cost ascertainment is a vital function performed by cost accounting. Cost
accounting mainly records each and every factor which is associated with
production performance in systematic manner. These activities involve fixed as
well as variable along with direct and indirect outlays. The data collected by
cost accounting is considered by managers in evaluating the accurate and actual
expense of products. However, without cost accounting, it is highly crucial to
find out the actual cost of the goods and services.
Controlling cost- Cost accounting
benefits the organisation in regulating their cost. Cost accounting makes
provision to detailed information associated with cost of each step of
production. This accumulated information is subsequently compared with set criterions.
However, if any deviation is found, essential steps are taken. As a result,
cost accounting helps in identifying deviations in cost and time controlling
them.
Inventory
control- Cost accounting supports in regulating the inventory by keeping track of
each items of the inventory. It mainly preserves information on complete
records of all raw resources to maintain timely order of raw materials. Cost
accounting also helps in prevention of critical situations such as excess order
or inadequate order of raw materials. It also avoids any wastage of materials
and losses for the company. Cost Accounting has an imperative role in increasing
the level of cost efficiency of organisation by taking strategic
decisions.
Measurement of
productivity- Cost accounting helps in measuring the effectiveness and production of
business operations. In such cases, managers can very easily obtain information
of production expenses. These expenses can be later analyzed in order to
determine productivity level of business operations. Cost accounting also helps
in preventing wastage of varied resources of the organization by means of
accurate monitoring. It primarily uses a typical cost method in determining the
level of efficiency of each procedure, product as well as department.
Determining
Selling Prices- Cost accounting supports ascertainment of exact cost of production of manufactured
goods. However, by tallying the revenue margin to the actual cost business can effortlessly
fix the selling price for its products. Companies which perform as per
cost accounting employ various techniques such as batch costing, job
estimation, provision and output estimation for determining the selling price
of its goods. Furthermore, it mainly provides all in-depth information related
to production cost to managers to make central decision vis-à-vis controlling
cost.
Reveals
profitable and non-profitable activities
Cost accounting provides
accurate details of each activity of business to administrators in determining which
one is lucrative and which one is not. It mainly supplies all detailed
information vis-à-vis the charges or prices of each product of business. In
such stages, managers by comparing the price of the product with demand in the
market can determine whether to carry on its manufacture or not. Cost
accounting further supports in determining cost-effective as well as
non-profitable activities of business by directors.
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Assignments
·
Understanding
the subject will make the assignment easy and comprehensive
·
Cost
accounting solutions must be self-explanatory
·
Students
must provide assignment in accordance to cost accounting analysis.
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Students
must undergo the process of collecting, analysing as well as summarizing
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