Cost Accounting & Management Decisions
Leah M. Pasternak
Professor Bryan Womack
December 1, 2013
Cost Accounting and Management Decisions
A unique and innovative manufacturing company It all started with an incandescent light bulb and from there, rocketed into one of the most successful, world-renowned company in the world. Thomas Alva Edison first established Edison General Electric Company in 1890 (General Electric, 2013). Two years later, another electrical competitor, the Thomson-Houston Company, merged with Edison General Electric to become the General Electric Company we now know today (General Electric, 2013). Manufacturing innovators in so many various products ranging from …show more content…
A problem with the traditional costing system is that nonmanufacturing costs are not associated with the products, so obtaining an accurate representation of what a product actually costs is difficult. This leads to inaccurate financial information which in turn leads to poor management decisions. Companies who use an activity-based costing system, such as General Electric, tend to generate more accurate financial information regarding their individual products. Companies like General Electric, who manufacture thousands of different products, benefit from using this costing system, simply because they are able to allocate all manufacturing and nonmanufacturing costs to their individual products in order to obtain accurate data for how much money it costs the company to manufacture their variety of products. Every activity that is associated with manufacturing a product is considered and then allocated to each individual activity used in creating the product (Johnson, 2013). Many companies use this costing system as a supplemental system simply because the amount of time and effort needed to generate this type of data is expensive and time-consuming (Johnson, 2013). General Electric has developed specific software programs for this type of costing, and is able to generate the most accurate financial date for all of their products that they manufacture.
How do General Electric’s forecasts compare to their end of year financial