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Cost Accounting = How can managers make higher-quality decisions? Give an example of decision made by...

Cost Accounting =

How can managers make higher-quality decisions? Give an example of decision made by one company and discuss how the mangers will make high quality decision?

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Cost accounting refers to a branch of accounting which deals with Costing point of the product. Cost accounting deals with the aspect of costing and review the things to maximise profits either by value engineering or product engineering.

An example of Decision - As the production capacity is always limited to 100% and can't breach that mark. So how to increase profits from the current level as the Shareholders want continuos growth. The managers may go for Cost reduction by value engineering.

The managers can ask the costing team of the company to give details of various aspects of costing like Labour cost , material cost and overheads.

The company can check for any extra process or cost which is not benefiting in any way or just adding the cost.This can be done only with the help of cost accounting

A PRODUCT USES A ONE KILOGRAM OF RAW MATERIAL WHICH COSTS RS 100 PER KG and processing cost with use of this raw material is Rs.50 per unit.

Alternatively, another raw material which costs Rs.80 per kg and per unit requirement of raw material is 1.2 kg and processing cost with this raw material is Rs 45 per unit.

All these details can be obtained by Cost accounting which is very much helpful for doing Value Engineering.

Another example of cost accounting which can help managers take decision like Packing material used is not required or increasing the logistics cost. The overall impact of discontinuing a packing on the overall profitability can only be estimated with help of Cost Accounting.

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