Please respond to the following discussion question. Your response should fully address all elements of the question and be a minimum of 200 to 300 words long.
What is a cost accounting system? Why is a cost accounting system important for a business? A business without a cost accounting system cannot effectively manage its operations. Give an example of how a company you are familiar with costs its products or services.
The response and two replies to other posts in this string in 100 word count each!
Hello Professor and Class
Cost accounting is distinct and separate from general financial accounting, which is regulated by generally accepted accounting principles (GAAP) and is critical for creating financial statements. Instead, cost accounting aims to report, analyze and lead to the improvement of inter-business cost control and efficiency. Cost accounting is a system of operational analysis for management. Even though cost accounting is commonly referred to as a costing method, the scope of cost accounting is broader than just costing. In cost accounting, there are elements of traditional bookkeeping, system development, creating measurable information and input analysis. For many firms, cost accounting helps create and measure business strategy in a more organic way. There is no legal requirement for cost accounting (unlike financial accounting for publicly traded firms); companies use it because it’s highly advantageous to do so. It’s much easier for a business to know how to use its resources better when it can track them, measure them and study their effects. This is what cost accounting provides.
Often, the simplest and most important objective of cost accounting is to determine selling prices. To use a basic example, the seller of sandwiches needs to be able to track the cost of bread, lettuce, sandwich meats, mustard and other ingredients. Otherwise, it would be difficult to know how much to charge for a sandwich. Another example of cost accounting is when I was employed by a Chevrolet dealership in the collision department, detailing cars as an employee wages were paid to me and the detailing material to wash, and wax, the cars.
3/5/19, 4:52 PM
It is an accounting system for manufacturers to be able to track the flow of inventory through the stages of production in order to estimate costs of products for analysis, estimation, and control of expenses. It is a framework to collect, record, classify, evaluate, and allocate cost to help management make decisions. Cost accounting when used properly, can lead to the elimination of wastes and inefficiencies, cost reduction, identification of the reasons for profits or loss, cost control, and aid in the preparation of financial statements. In a nutshell, it is a system developed to make available to managers a process to assess the daily finances of the company in order to make an informed decision on where to cut cost to improve profitability. Cost accounting system is important for businesses because it helps managers make better decisions by getting the key data for planning and controlling purposes. Cost accounting system also help with measuring performance and determining products or services costs and prices. A practical example of cost accounting is finding out why my electricity bill is so high in a month (summer time). In order to do this, I recorded the detailed account of when I used electricity to include hot water usage and gas usage. I found out that my water heater was leaking, I was using old light bulbs, and biggest culprit is a teenager that leaves her windows open while the A/C is on. So the system works.
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