COST ACCOUNTING IN A

CONTEMPORARY ENVIRONMENT

Sri Dewi Edmawati

 COST ACCOUNTING DEFINED

 Cost accounting identifies, defines, measures,

reports, and analyzes the various elements of
direct and indirect costs associated with
producing and marketing goods and services.
 Cost accounting also measures performance,
product quality, and productivity
 Cost accounting is not only calculating product
costs for inventory valuation but also costing for
decision making.
 THE MAIN OBJECTIVE OF COST
ACCOUNTING
 Communicating both financial and non
financial information to management for
planning, controlling, and evaluating
resources.
 THE RELATIONHSIP OF COST ACCOUNTING WITH
FINANCIAL ACCOUNTING AND MANAGEMENT
ACCOUNTING

Product cost for

inventory & income Financial
determination (B/S & Accounting
I/S)
Cost
Accounting
Cost information for
planning, controlling, Management
and evaluating Accounting
resources
 THE ROLE OF COST ACCOUNTANTS

 Cost accountant as a member of the

controller’s department is responsible for
collecting product costs and preparing
accurate and timely reports to evaluate
and control company operations.
 THE IMPACT OF AUTOMATION ON COST
ACCOUNTING
The changes of manufacturing environment:
Flexible Manufacturing System (FMS):
 Reduces set up or changeover times
 Efficiently manufacture a wide variety of products in
small batches
 Product life cycles are getting shorter
 Shifts the emphasis from large-scale manufacturing of
standard products to highly automated job shop
environments
 Computer-controlled machine tools improve product
quality and reliability
 Leads to shorter production runs, lower inventory levels
and lower overall costs
Total Quality Management (TQM)
 Zero defect concept (do it right the first time)

Value Added Activities

 Looking for ways to reduce throughput time

Just In Time Concept (JIT)

 Zero or small inventory
Less warehouse space and storage equipment
Reducing inventory holding costs
Increasing the productivity
Some major changes of cost accounting:
 Activity Based Costing (ABC)
ABC is designed to eliminate value and non value added
activities
 Life Cycle Costing
Life cycle costing tracks and collects the cost
attributable to each product or service from its
initial research and development to final marketing
to customers, thus the term cradle to grave
costing.
 Target Costing
Life cycle costing encourages target costing, an
approach that determines what product or service
should cost, based on its sales price less a target
profit
Keizen Costing
 Applied to ensure the continuous
improvement by supporting the cost
reduction process in the manufacturing
phase.