COST ACCOUNTING AND CONTROL
historical costs that serve as basis
USES OF COST ACCOUNTING DATA
- The information produced by a
cost accounting system provides a
basis for determining product cost
and aids management in planning
and controlling operations.
Determining Product Costs
- Cost accounting procedures help
management in gathering the data
needed to determine product costs
and thus generate meaningful
financial statements and other
reports.
- Cost procedures must be designed
to permit the computation of unit
costs as well as total product costs.
Unit cost information is also useful in
making a variety of important marketing
decisions.
1. Determining the selling price of a
product.
2. Meeting competition.
3. Bidding on contracts.
4. Analyzing profitability.
Planning and Control
- One of the most important
functions of cost accounting is the
development of information which
can be used by management in
planning and controlling
operations.
- Planning is the process of
establishing objectives or goals for
the firm and determining the
means by which the firm will attain
them.
- Planning is essential to good
management because it provides a
means of coordinating all of the
operations of the firm.
- Cost accounting helps in the
development of plans by providing
for projecting data for planning.
Planning can be divided into three (3)
components:
1. Strategic Planning - concerned
with setting long-range goals and
objectives to determine the overall
direction of the company.
2. Tactical Planning - concerned with
plans for a shorter range (or time
period) and emphasizes plans to
achieve the strategic goals.
3. Operations Planning - day to day
implementation of tactical plans.
Emphasizes the coordination of
the major factors of production
(materials, labor, and facilities)
- Control is the process of
monitoring the company’s
operations and determining
whether the objectives identified
in the planning process are being
accomplished.
TWO BASIC PRODUCT-COSTING
SYSTEMS
1. Job-order costing
- A system for allocating
costs to groups of unique
product. Applicable to the
production of the customer
specified products sush as
the manufacture of special
machines.
- Each job becomes a cost
center for which costs are
accumulated.
- A subsidiary record (job
cost sheet) is needed to
keep track of all unfinished
jobs (work in process) and
finished jobs (finished
goods).