Nobody downloaded yet

Cost (Management) Accounting Adds Value to an Entity - Research Paper Example

Comments (0) Cite this document
Summary
Cost (management) accounting adds value to an entity Introduction Management (cost) accounting is a modern phenomenon that helps organisations and various stakeholders in taking different decisions for different purposes. This write up considers different uses of cost accounting and evaluate the practical aspects of different cost accounting systems…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.8% of users find it useful
Cost (Management) Accounting Adds Value to an Entity
Read TextPreview

Extract of sample "Cost (Management) Accounting Adds Value to an Entity"

Download file to see previous pages Vanderback)i Cost or managerial accounting is modern day useful accounting technology that helps departments of a business in variety of ways. Some of its major applications are as under: Inventory valuation: Costing helps in calculation of cost per unit. This cost per unit is employed to value inventory for financial statement and other purposes. Record costs: Costs associated with a product or service need to be recorded for the purposes of preparing income statement in order to evaluate the performance of the department and company over the selected financial period. Pricing of products and services: Cost per unit is helpful in the business to tag sale prices to its products and services. For example, if the cost of a product comes to $1.10 per unit, the management of the business may decide to price the product at $1.50 per unit in order to earn a profit margin of ?0.40 per unit. Decision making: Cost information is useful for the business to make important decisions regarding quantity of the production keeping in view demand of product available in the market. Most business decisions are cost related as the ultimate aim of any business is to earn maximum profits by reducing costs. Practical use of managerial (cost) accounting practices Target costing Target costing is an application of absorption costing. It involves setting a target cost by subtracting desired profit from a competitive market price. Real world users include Sony, Toyota, and Swiss watchmakers, Swatch. In effect it is the opposite of conventional ‘cost plus pricing’. “Sony target costing system got five stages which are target price setting, target margin setting use interactive process and try to meet division’s long term profit objective, target cost setting which target cost is equal to target price minus target margin, and lastly is defined whether group target is met or not. If group target is met, it will go to final stage which is final decision making.”(Sony Corporation: The Walkman Line)ii Target costing is in fact an adoption of absorption costing.“Under absorption costing both fixed and variable costs are charged to product costs.”(Rajasakeran V.)iiiAbsorption costing is invariably used by most companies in order to determine the full production cost per unit. In target costing Sony first estimate the selling price for a new product. Then reduce this price by its required level of profits. This provides a target cost figure for product designers to meet. Then it endeavours to reduce costs to provide a product that meets that target costs Marginal Costing Airlines generally use marginal cost concept. “When an airline flies without passengers in its seats that revenue is lost forever. So rather than having a fixed price for all seats for a particular flight it will vary its pricing based on how urgent the passenger wants to make the flight and how many seats are available. If the flight is partly booked it will reduce it ticket prices in the last minute. Flying an extra passenger will only cost the cost of an extra sandwich. As long as the ticket price is over this extra sandwich cost it will make a profit.” (Skanda Kumarasangam)iv The airlines use marginal costing system. The marginal cost is the extra cost arising as a result of making and selling one more unit of product or service, or saving in the cost ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Cost (Management) Accounting Adds Value to an Entity Research Paper”, n.d.)
Retrieved from https://studentshare.org/business/1439801-accounting-and-manufacture-and-companies
(Cost (Management) Accounting Adds Value to an Entity Research Paper)
https://studentshare.org/business/1439801-accounting-and-manufacture-and-companies.
“Cost (Management) Accounting Adds Value to an Entity Research Paper”, n.d. https://studentshare.org/business/1439801-accounting-and-manufacture-and-companies.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Cost (Management) Accounting Adds Value to an Entity

Describe the methods used to calculate value added. How does value added contribute towards understanding the connections betwee

...that when being compared to accounting income, it is perceived as the net figure. The value expressed is the value that an economic body, such as a person, an industry or a company adds to the products and services it purchased or received from other entities during its creative or own productive economic activities.5 In the second one, additive method, the value added is represented by the total sum of the distributed parts that constitute the created wealth. This is done with respect to the reality that all the created wealth is well distributed i.e. by being allocated in some way. When considering a company, value...
5 Pages(1250 words)Essay

Cost Accounting and Management Decisions

...? Cost Accounting and Management Decisions Introduction The purpose of this essay is to evaluate the cost accounting system of an US based manufacturing organisation, i.e. Alcoa. The paper further assesses the cost structure of the company through the application of a cost-volume analysis. Identifying the cost accounting system of the organisation, the study will further attempt to discuss the advantages of activity-based cost systems. Correspondingly, the study will also intend to discuss on the sales forecast of company sales along with discussing upon the environment...
5 Pages(1250 words)Essay

Cost Accounting and Management Decisions

...? Cost Accounting and Management Decisions Ford Motor Company Henry Ford founded Ford Motor Company in 1903. Headquartered in Dearborn, Michigan, the company mainly produces three products automobiles, commercial vehicles and automobile parts. Ford is currently the second largest U.S based automaker but the fifth in the world. Ford Motor Company produced 5.532 million automobiles in its over 90 plants and facilities spread worldwide with a revenue collection of U.S $ 134.3 billion and U.S $ 15.99 billion in Equity and a net income of U.S 5.664 billion (Operating Highlights: Annual Report, 2008, p. 1). Management of this company believes in ranking the automobiles by the...
5 Pages(1250 words)Assignment

Management accounting and financial accounting

...performance management. Management accountants are excellently placed to enhance environmental performance of firms by integrating fiscal and non-fiscal environmental data and key indicators of performance into conventional managerial accounting systems of control (Gray et al. 1993). Very contemporary advances consist of novel balanced scorecards that provide an extensive array of fiscal and non-fiscal actions. Certainly, the presentation of non-fiscal indicators is recommended because a persistent spotlight on monetary ramifications alone might promote a prominence on cost-cutting purely to augment earnings, instead of focusing on fine ethical...
12 Pages(3000 words)Essay

Cost and Management Accounting

...with federal programs and their changes over time and in relation to costs Efficiency and effectiveness of the government's management of its assets and liabilities Specific Cost Accounting Standards devised by Britvic Britivic has set certain standards in cost accounting procedures to have accounting information in standard form and also monitors the adherence of it. These standards include Managerial Cost Accounting Concepts & Standards for the Federal Government: Statement of Federal Accounting Standards byDIANE Publishing Company 1995 -109 pages Requirement for...
7 Pages(1750 words)Essay

Historical cost accounting and fair value acounting

...Order No: 266421 ID: 24465 HISTORIC COST ACCOUNTING AND FAIR VALUE ACCOUNTING Differences Between Historic Cost Accounting And Fair ValueAccounting: The use of historic costaccounting and fairvalue accounting have been one of the most debatable topics in recent years. Inorder to differentiate between them it is necessary to understand what are they. Historic costaccounting is an approach to accounting using asset values based on the actual ...
3 Pages(750 words)Essay

Acco330 Cost management accounting

...the situation at PFC a SWOT analysis is needed. Strengths One of the major strengths of the company is the quality of its products. The management team of the company has formed a corporate culture in which the employees are committed to producing top quality merchandise. Strength of the company is the simplicity of its operation. The company only produces two types of products. This allows the firm to keep its cost down, lower its inventory, standardize production, and achieve economies of scale. Weaknesses A glaring weakness at PFC has been the lack of accounting work prior to 1997. The company also experience in 1997 other problems such as higher wages costs and a...
5 Pages(1250 words)Case Study

Cost Accounting

...RUNNING HEAD: Cost Accounting Cost Accounting of This paper seeks to comment on theremarks made by the Chief executive officer (CEO) of Home Workout Equipment Corporations to a colleague that he does not understand why other companies are wasting so much time in the budgeting process. For the said CEO, setting the company goals is done by him and that everyone would just need to strive to meet them. To follow what the CEO wants to be done may be easy for a number of managers and employees but not at all times. When the subordinates including the managers have to do some work that would require their decision-making skills...
2 Pages(500 words)Case Study

Cost Accounting

...Development. India: New Age International. Lal, J. and Srivastava, S. (2008). Cost Accounting. India: Tata McGraw-Hill Education. Porter, M. E. (1998). Competitive advantage: creating and sustaining superior performance : with a new introduction. USA: Simon and Schuster. Rajshekharan, V. & Lalitha, R. (2010). Cost Accounting. India: Pearson Education India. Ross, S. A. Westerfield, R. and Jordan, B. D. (2008). Fundamentals of corporate finance 8th ed. India: Tata McGraw-Hill Education. Saxena, V. K. and Vashisht, C. D. (2004). Advanced cost and management accounting textbook 5th ed. India: Sultan Chand and Sons. The...
8 Pages(2000 words)Essay

COST AND MANAGEMENT ACCOUNTING

...Question No Variable Cost Fixed Cost Mixed Cost The cost of materials used to build a desk  Rent paid on a factory building  The flat fee paid for a copier plus the per-copy charge  The cost of hourly workers in a Laundromat  Depreciation on a factory equipment    The paycheck of a worker paid on commission alone  The salary of the factory supervisor    The cost of electricity used to run the air conditioning unit      Question No. 2 (a) Month Machine Hours Electricity...
2 Pages(500 words)Speech or Presentation
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Research Paper on topic Cost (Management) Accounting Adds Value to an Entity for FREE!

Contact Us