Pages: 64

No chapter abstract available.

Pages: 15

‘Cost accounting’ is internal in nature and entails assessing an organisation’s cost structure. It collects data on expenses related to different tasks or functions, allocates them to goods and services (the cost objects) assesses how effectively costs are used and results in cost containment. Essentially, the goal of cost accounting is to rationalise resources for future viability by outlining a company’s profit and loss outcome. It supports and enhances financial accounting by providing it the required cost information. The present chapter lays down the foundation of the cost accounting process with an introduction to cost concepts and their types.

Pages: 15

In an organisation, what activities drive your overhead costs, and where are they going towards? It is becoming increasingly uncertain. With Activity-Based Costing (ABC), product-focused businesses can get into the nitty-gritty details to better allocate expenses. That implies you can more accurately analyse your spending – and price your products. Activity-Based Costing might be complex, but its right implementation can ultimately help your business. This chapter builds on the first introductory chapter and explains the traditional method and the ABC method for calculating costs.

Pages: 13

In the case of special-order firms, products produced or jobs undertaken are of a diverse and specialised nature. In these concerns, it is necessary to keep a separate record for each lot of products or jobs of the entire stage of work completion. So, a separate job card or cost sheet is maintained for each job or product. This defines the essence of job costing. In this chapter, job costing is covered as a method of cost allocation for a product or service on a customised basis.

Pages: 19

Businesses where a product passes through different stages of production which are distinct and well-defined employ process costing. It is used in industries that produce products that are of a similar nature. It is also used in assembly-type industries. It is assumed in process costing that the average cost presents the cost per unit. Examples include chemicals, textiles, food processing, and so on. Understanding and implementing process costing is essential for accurate cost allocation and effective financial management. The present chapter introduces process costing, an alternative method of cost allocation for mass-scale industries.

Pages: 33

No chapter abstract available.

Pages: 12

Business organisations use budgeting as a tool for financial control in addition to activity planning and forecasting. Different departments create budgets to track their operations and evaluate performance to make sure it meets goals. Budgets are made for a set amount of time, such as a year, quarter or month. Even though budgeting makes use of past data, its main goal is to plan activities for the future. The second phase of cost accounting process, the ‘cost control’, is addressed here with the discussion of the budgetary control as the managerial tool for cost management.

Pages: 12

Managers need to compare the cost of their products to the allocated funds. The causes of deviations are continuously examined and accountability is assigned on time. Therefore, the management is quite concerned about ‘what a product should have cost’ in order to increase cost performance. A managerial tool for assessing the efficacy and efficiency of cost performance is standard costing. It helps in explaining the variations in terms of their causes and responsibilities. Standard costing is discussed here for providing a benchmark to an organisation for controlling costs and becoming more competitive.

Pages: 7

Responsibility accounting is a type of management accounting which holds internal accounting, budgeting and management of the business all accountable. Its main objective is to help a company’s planning, costing and responsibility areas. It helps in the development of processes related to performance measurement as well as the performance analysis of the identified responsibility centres. For the sake of detailed cost analysis and control, responsibility accounting is pursued as the third stage of cost control.

Pages: 28

No chapter abstract available.

Pages: 17

In managerial decision-making, the type of cost is crucial. The management should factor in decision-varying costs when doing decision analysis. Fixed cost is often irrelevant when making decisions that are for relatively short periods of time, involve only minor deviations from current practice or both. The short-term inability to alter fixed costs is the cause. In this case, the variable cost becomes significant and ‘marginal costing’ is used to determine how the variable cost affects output or production volume and reach an appropriate managerial decision. This chapter builds the premise of cost-decision-making, the final stage of cost accounting process. Marginal costing and decision-making are the essence of this part.

Pages: 9

Target costing is a management strategy rather than just a costing approach which is used in businesses to determine the desired cost of a product based on market conditions and customer expectations. It involves setting a target cost for a product and then working to achieve that cost through design, production and other processes while still maintaining the desired level of quality and profitability. Another cost technique from a managerial decision-making perspective is Target costing, explained in this chapter.