Skip to content
Businessglitch

Businessglitch

Free market business

Primary Menu Businessglitch

Businessglitch

  • Business & Finance
  • Account Business
  • SEO marketing
  • Business Market
  • Business Ideas
  • Business
  • About Us
    • Advertise Here
    • Contact Us
    • Privacy Policy
    • Sitemap
  • Account Business

Cost Accounting: The Missing Component of Supply Chain Management

March 3, 2023 Amy J. Foley

One of the first questions I ask our Warehouse Management students is, “Do you know your operating costs?”, and our Production Planning Management students, “Do you know the cost to produce one of your items?” After five years of training, I can count on one hand how many students were able to answer these questions, which immediately tells me their company does not utilize cost accounting.

The reason students are unable to answer the question is their company only has what is called management and financial accounting in place. Management accounting focuses on historical and estimated data management needs to conduct ongoing operations and do long-range planning. The purpose of management accounting is to accumulate financial information for use in making economic decisions.

Financial accounting focuses on gathering historical financial information to be used in preparing financial statements that meet the needs of investors, creditors, and other external users of financial information. The statements include a balance sheet, income statement, retained earnings statement, and statement of cash flows. Although these financial statements are useful to management as well as to external users, additional reports, schedules, and analyses are required for management’s use in planning and controlling operations.

Management and financial accounting focus on the company’s operations as a whole and cannot provide the detail necessary to accurately determine product costs and pricing. At best all they can do is provide averages. In addition, cost accounting provides the detailed cost information management needs to control current operations and plan for the future. Management uses this information to decide how to allocate resources to the most efficient and profitable areas of the business.

Cost accounting enables management to properly allocate costs such as raw materials, labor, and other factory resources to the products actually using then instead averaging them over all products. Without cost accounting, expenses such as major investments in physical assets, developing the workforce, depreciation, taxes, insurance, utilities, machine maintenance and repair, materials handling, production setup, production scheduling selling and administrative expenses are usually lumped together to create an overhead rate which is added to a product as an overhead markup. The true cost of a product is never determined which means the company is charging too much for some products and not enough for others.

Principles of cost accounting have been developed to enable manufacturers to process the many different costs associated with manufacturing and to provide built-in control features. The information produced by a cost accounting system provides a basis for determining accurate product costs and selling prices, and it helps management to plan and control operations.

Determining Product Costs and Pricing
Cost accounting procedures provide the means to determine product costs that enable the preparation of meaningful financial statements and other reports needed to manage a business. The cost accounting information system must be designed to permit the determination of unit costs as well as total product costs. Unit cost information is also useful in making important marketing decisions such as determining the selling price of a product, meeting competition, bidding on contracts, and analyzing profitability.

Planning and Control
One of the most important aspects of cost accounting is the preparation of reports that management can use to plan and control operations. Planning is the process of establishing objectives or goals for the firm and determining the means by which they will be met. Effective planning is facilitated by clearly defined objectives of the manufacturing operation and a production plan that will assist and guide the company in reaching its objectives.

Cost accounting information enhances the planning process by providing historical costs that serve as a basis for future projections. Management can analyze the data to estimate future costs and operating results and to make decisions regarding the acquisition of additional facilities, any changes in marketing strategies, and the availability of capital.

Effective control is achieved by assigning responsibility for each detail of the production plan through the establishment of cost centers. All managers should know precisely what their responsibilities are in terms of efficiency, operations, production, and costs. The key to proper control involves the use of responsibility accounting and cost centers by periodically measuring and comparing results and taking necessary corrective action.

Continue Reading

Previous How Accounting Services Can Help a Small Business
Next Management and Financial Accounting

More Stories

  • Account Business

Why CPA Accountant Marketing Programs Fail

March 27, 2023 Amy J. Foley
  • Account Business

Accounting Finance – The Heart of Any Successful Business

March 25, 2023 Amy J. Foley
  • Account Business

Top 8 Questions to Ask Before Hiring a Tax Accountant

March 22, 2023 Amy J. Foley

Leave a Reply Cancel reply

You must be logged in to post a comment.

March 2023
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
2728293031  
« Feb    

Archives

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • July 2021
  • April 2021
  • November 2018
  • October 2018
  • December 2016

Recent Posts

  • Why CPA Accountant Marketing Programs Fail
  • Business Financing Cash Flow On Auto Pilot?
  • Accounting Finance – The Heart of Any Successful Business
  • Internet Marketing Through Search Engine Optimization (SEO)
  • Secrets to Generate Profitable Business Ideas

BL

Tags

Amazon Fba Business Atlanta Business Chronicle'S Boss Baby Back In Business Business Administration Degree Business Attire Women Business Card Design Business Cards Templates Business Casual Dress Business Casual Outfits Business Checking Account Business Credit Card Business For Sale Near Me Business Intelligence Platform Business Lawyer Near Me Business Loan Calculator Business Name Ideas Business Professional Women Business Spectrum Login California Business Entity Search Capital One Spark Business Carl Weber'S The Family Business Charlotte Business Journal Custom Business Cards Delaware Business Search Florida Business Search Fl Sos Business Search Harvard Business Publishing Insurance For Small Business Kelley School Of Business Maryland Business Express Maryland Business Search Moo Business Cards National Business Furniture New York Business Search Ohio Business Gateway Onedrive For Business Online Business Ideas Paramore Misery Business Risky Business Cast Small Business Insurance Spectrum Business Customer Service Tom Cruise Risky Business Us Small Business Administration Verizon Wireless Business Verizon Wireless Business Login

Visit Now

Financial Education Services

contentplacement.idĀ 

scorpion control las vegasĀ 

Related Article

  • Account Business

Why CPA Accountant Marketing Programs Fail

March 27, 2023 Amy J. Foley
  • Business & Finance

Business Financing Cash Flow On Auto Pilot?

March 26, 2023 Amy J. Foley
  • Account Business

Accounting Finance – The Heart of Any Successful Business

March 25, 2023 Amy J. Foley
  • SEO marketing

Internet Marketing Through Search Engine Optimization (SEO)

March 24, 2023 Amy J. Foley
  • Business Ideas

Secrets to Generate Profitable Business Ideas

March 23, 2023 Amy J. Foley
businessglitch.com | CoverNews by AF themes.