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Cost accounting has distort product costs due to:
- Conventional cost accounting distorts management's view of business through unrepresentative overhead allocation and inappropriate product costing.
- Traditional approach usually absorbs overhead costs across products and orders solely on the basis of the direct labor involved in their manufacture.
- Direct labor as a proportion of total manufacturing cost continues to fall, this leads to more and more distortion and misrepresentation of the impact of particular products on total overhead costs.
- The failure of fixed cost allocations, as firms introduce more automated machinery, direct labor is increasingly engaged in setup and supervisory functions and no longer represents a reasonable surrogate for resource demand by product.
- Inability of the two stage cost allocations system to report variable cost was a common feature of many costs system.
- The failure of Marginal Costing when variable costs of labor, material and some overhead were relatively low proportion of total manufactured cost, and product diversity was large.
- The short-term perspective variable cost system is rejected, because the decision to offer a product, creates a long-term commitment to manufacture, market and support that product.
- The cost of complexity is hidden, the more complex production environment requires extended manufacturing-support facilities, such as setups, expediting, and scheduling activities.
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Why traditional cost systems distort product costs because?
they emphasise financial accounting requirements
Is accounting staff salary a period cost or a product cost?
Accounting staff are considered executive costs which would be a period cost.
What are the necessities of cost accounting?
Basically, cost accounting is an area of accounting that measures, records & reports the product cost. It is important or necessary generally for 2 purposes. 1. determine cost. 2. control cost.
What are the difference between cost accounting and financial accounting?
Prime role of cost accounting is to calculate the cost per unit of product produce while financial accounting deals with financial reporting of company's performance.
Differentiate the Financial Accounting from Cost Accounting and Management Accounting?
to know the financial position(i.e. profit or loss) and cost accounting to know the cost price of product of business and management accounting is to take the decision based on financial and cost accounting to prepare bugdget, analysis etc
Why traditional cost systems distort product costs because?
they emphasise financial accounting requirements
Is accounting staff salary a period cost or a product cost?
Accounting staff are considered executive costs which would be a period cost.
What are the necessities of cost accounting?
Basically, cost accounting is an area of accounting that measures, records & reports the product cost. It is important or necessary generally for 2 purposes. 1. determine cost. 2. control cost.
What are the difference between cost accounting and financial accounting?
Prime role of cost accounting is to calculate the cost per unit of product produce while financial accounting deals with financial reporting of company's performance.
Differentiate the Financial Accounting from Cost Accounting and Management Accounting?
to know the financial position(i.e. profit or loss) and cost accounting to know the cost price of product of business and management accounting is to take the decision based on financial and cost accounting to prepare bugdget, analysis etc
What role of cost accounting in manufacturing organization?
cost accounting plays very important role in manufacturing organisation.unless cost accounting system one can't get the cost of the product appropriately.Many organisations fix their selling price based on the cost information.Not only in ascertaining cost of the product it can be used as measurement for their performance
What is cost absorption in cost accounting and work examples?
A managerial accounting cost method of expensing all costs associated with Manufacturing a particular product
Why traditional cost systems distort product cost?
In traditional cost system overheads are allocated to products based on predetermined rate and that’s why some of that cost which is not related to that product charged to it and due to which actual cost of product cannot be determined.
Why is cost accounting essential for management?
Cost accounting is used to calculate the per unit cost of product so if the management does not know the per unit product price they will not able to set the selling price of product and determine the profit per unit which they can earn and so many other important decision like these are dependent on cost accounting.
What is different between cost accounting and financial accout?
Cost accounting deals with calculating the per unit cost of unit of product while financial accounting deals with reporting of financial performance of the busines
Cost Accountant?
The principal responsibility of a cost accountant is to track and analyze the factors that result in the total cost of a product. This field of cost accounting differs from most other accounting specialties in that the focus of the career is on cost analysis and price allocation. This accounting method takes in two major principals: fixed cost accounting is used when production method is not a factor and variable cost accounting which examines product production and quantity. Cost accounting is broken down into two major categories, job order cost accounting and process cost accounting. Job order cost accounting is the specialty that determines product or service cost by considering the total cost of production for an individual product. Job order cost accounting tracks every expense involved in a product’s production to determine the final price of an individual product. Process cost accounting differs from job order cost accounting in that product cost is evaluated by summing of the cost of each process which results in a final product. Process cost accountants determine the expense of each particular process and then add them together to determine the price of a group of products. The minimum requirements to become a cost accountant are to earn a bachelor’s degree in accounting or a related degree. Many companies prefer either experience in cost analysis or project management. Accountants who have work experience in industrial or engineering product management are looked upon favorably. Earning a degree in finances or pursing an MBA with a focus on financial management will make any applicant very competitive. The CMA public accounting license is not necessary for employment but some employers do prefer it for the security it provides and the financial management principles involved in earning the license. The average earnings for a cost accountant are in the areas of $55,000 to $60,000. Entry level cost accountant can expect to start out at $35,000 to $40,000. Initial earnings will quickly increase after a few years of experience and will vary by location.
What is importance of cost accounting?
Cost accounting helps businesses manage their product's cost better. With knowledge about how costs behave businesses can respond accordingly, so that they can make a profit.
