Purpose of Cost Accounting

3613 words 15 pages
CH01_Bragg_36794 3/13/01 9:40

M Page 9


Purpose of Cost Accounting


CH01_Bragg_36794 3/13/01 9:40

M Page 10

CH01_Bragg_36794 3/13/01 9:40

M Page 11


Role of Cost Accounting

When properly implemented, the cost accounting function can have a pervasive influence in the modern corporation. Unfortunately, it is not always properly implemented because management often is not completely aware of all the uses to which the cost accounting function can be put. This chapter describes the main categories of activities in which this function can become involved, and can be used as a guide by the controller in creating a well-rounded niche for the cost accountant.

The key task for the cost accountant is
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This format tends to have few operational statistics besides percentages of completion and lists of to-do items that must be finished in order to ensure conclusion of the project. Decision-specific reports. Many times the cost accountant is called on to report on a specific issue that occurs only once, after which the report is discarded. For example, a report may be needed that describes the particular quality costs associated with the selection of three prospective production processes the management team is considering installing. Once the decision is made and the installation completed, there is no longer a need for the report. Another example is a review of waste in a production process—the report may cover such information as times elapsed when moving products between manufacturing stations, setup times, cycle times, and the amount of space occupied by idle work in process; this report is concerned less with financial issues than with process efficiency, but it is still the cost accountant’s job to complete it. Clearly, these reports can cover virtually any topic and can include any type of information— financial, operational, or a mix.

An enormous range of topics can be covered by internal reports. Because they lack the amount of structure imposed on external reports, they are much more interesting to prepare, giving the cost accountant free rein to express creativity in designing the perfect format that will result in easy readability and effective management


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