Cost accounting is generally considered as being applicable only to manufacturing concerns. This is not so. Its applications are in fact much wider. All types of activities, manufacturing and non-manufacturing, in which monetary value involved, should consider the use of cost accounting. Wholesale and retail business, banking and insurance companies, hotels, hospitals, schools, colleges, universities, farming and cinema houses, all may employ cost accounting techniques to operate efficiently. It is only a matter of reorganization by the management of the applicability of these costing concepts and techniques in their own fields of the endeavor.
The cost accounting is ascertainment of cost, fixation of selling price, proper recording and presentation of cost data to the management for measuring efficiency and for cost control. The aim is to know the methods by which expenditure on materials, wages and overhead is recorded, classified and allocated so that the cost of products and services may be accurately ascertained; these costs may be related to sales and profitability may be determined. Yet with the development of business and industry, its objectives are changing day by day.
Best Answer - Chosen by Voters Cost accounting is the process of tracking, recording and analyzing costs associated with the products or activities of an organization. Cost accounting need not follow generally accepted accounting principles, or GAAP, because its primary use is for internal managers, rather than external auditors. Costs are measured in units of currency by convention. Cost accounting could also be defined as a kind of management accounting that translates the Supply Chain (the series of events in the production process that, in concert, result in a product) into financial values. Managers use cost accounting to support decision making to reduce a company's costs and improve its profitability.
* 1) Raw Material * 2) Manual Labor * 3) Indirect Expenses
costing concepts :
Activity-based costing
Activity-based costing (ABC) is a system for assigning costs to products based on the activities they require. In this case, activities are those regular actions performed inside a company. "Talking with customer regarding invoice questions" is an example of an activity performed inside most companies.
Accountants assign 100% of each employee's time to the different activities performed inside a company (many will use surveys to have the workers themselves assign their time to the different activities). The accountant then can determine the total cost spent on each activity by summing up the percentage of each worker's salary spent on that activity.
A company can use the resulting activity cost data to determine where to focus their operational improvement efforts. For example, a job based manufacturer may find that a high percentage of their workers are spending their time trying to figure out a hastily written customer order. Via ABC, the accountants now have a currency amount that will be associated with the activity of "Researching Customer Work Order Specifications". Senior management can now decide how much focus or money to budget for the resolutions of this process deficiency. Activity-based management includes (but is not restricted to) the use of activity-based costing to manage a business.
Marginal Costing
This method is used particularly for short-term decision-making. Its principal tenets are:
* Revenue (per product) - Variable Costs (per product) = Contribution (per product) * Total Contribution - Total Fixed Costs = Total Profit or (Total Loss)
Thus it does not attempt to allocate fixed costs in an arbitrary manner to different products. The short-term objective is to maximize contribution per unit. If constraints exist on resources, then Managerial Accounting dictates that marginal cost analysis be employed to maximize contribution per unit of the constrained resource (see Development of Throughput Accounting, above).
To explain all these it takes a lot...as each one of them is a concept itself.. You should have asked each one of them in different question...to get accurate answers... Any ways..I hope this info is useful to you... Good luck..!!!!
Cost accounting is generally thought of in connection with manufacturing operations. Cost accounting in this field has reached its highest development, and its valuable and well proved services to manufacturing concerns amply justify this association. There is no reason, however, to believe that the principles and procedures of cost accounting cannot, with some variations, be applied to other fields.In fact, wherever it is necessary to know the cost of manufacturing a particular product, doing a particular job, rendering a particular services, or investigating efficiency in terms of cost, cost accounting techniques and procedures can be applied with greater benefits.
In additions to its use in the manufacturing operations, another useful area of its application is field of marketing and administration. In this field, the work done is of comparatively recent origin and has not been developed to the same degree of refinement as in the manufacturing field. Much work, investigation and research into procedures and methods in this area are currently being observed.
In short, procedures and techniques developed by cost accounting have been found useful in the fields of banking, insurance, public utilities, motor trucking, departmental stores, hospitals, hotels educational institutions, and even in professional offices, such as doctors, lawyers; accountants and teachers.
