Cost Accounting as A Tool of Decision Making in Today Business

Decision making in today business is one of most difficult work of manager. Decision making is the process to select best alternative out of different alternative for solving business problems. A prudent cost accountant can use different techniques of cost accounting and make it the best tool of decision making in business.

We can see most common problems in business like to fix the price of product, to reduce the cost of product and to increase overall profitability of business.

Cost accounting provides cost sheet, statement of material and labour utilization and some other reports like budget which can be used immensely for comparing the standard cost. After this, businessman can decide best price of products. We can also compile the following information of cost accounting which can be used for business decision making.

1. Cost Sheet

Cost Sheet is very helpful to find the cost of each unit. By comparing it with previous year or previous month's cost sheet, manager can take the decision regarding reducing the cost of product.

If our costs are increasing which has been shown in cost sheet , then manager can identify the place of production or sales where company is wasting its money. After this, manager to reduce the wastage by using quality product techniques, to drop useless production processes and also standardization of raw material.

2. Labour Cost Reports

Labour cost reports are helpful to reduce labour turnover and idle time cost. In the off season, some of workers are free and doing nothing. This time can be calculated from statement of time utilization of each worker in production purpose and by studying its statement, manager can take decisions to transfer some of workers to other busy departments for effective utilization of human resources for business purposes.

3. Overhead Utilization Reports

These reports are helpful to pay only genuine overheads and distribute it on the product according to valid basis. These reports are helpful to calculate the correct cost of overhead and to control indirect expenses of business.

Following are the techniques of Cost Accounting which can be used for decision making process in business:

[*] Marginal Costing :

To solve the linear programming problems, we need to linear variables. In marginal cost, we have two variables and  both  production level and variable cost are linears. So by creating their relationship, we can decide  the production level by maximizing our profitability or minimizing our cost. In other words, we can find equilibrium production point under marginal costing technique.

[*] Analysis of Variance :

To reduce the deviation after study the analysis of variance in cost accounting.

[*]  Cost Benefit Analysis or Break Even Point Analysis

To purchase the fixed assets at minimum cost after studying cost benefit analysis of cost accounting. We can also use this tool for production purposes also. We can check the level of production where total cost is equal to total revenue and  this level will be break even point. We must produce up to this level for securing our business from losses. So, it indicates our business to decide best.

[*] Activity Base Costing

In ABC costing we calculate the each unit's total cost on  the basis of different activities. It reduce indirect cost after assigning it on product directly.

Eventually, cost accounting is helpful to check each and every point of business where money is misusing and due to this our cost is increasing. By reducing this cost, cost accounting is helpful to increase the return on investment.


Comments on this Website: 1
Share above Content to Your Friends


access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
Accounting Education: Cost Accounting as A Tool of Decision Making in Today Business
Cost Accounting as A Tool of Decision Making in Today Business
Accounting Education
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock