Essay Sample on Cost Accounting: A Managerial Tool

Introduction

Cost accounting is a form of managerial accounting whose goals are to detect a firm's overall price of manufacture by gauging the flexible overheads of every stage of manufacturing. There are several methods of cost accounting (Datar, S. M., & Rajan, M. (2018). For example, cost accumulation and job-order, to mention a few. Cost accumulation entails the use of a formal cost accounting to gather cost data (Lafond et al.,2015). Job-order, on the other hand, involves assigning industrial costs, which includes labor, raw-materials and overhead expenses of a separate item of output. This paper will give reasons as to why managers preferred cost accumulation over the job-order costing system.

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Job-order costing gives a detailed analysis of wages, expenses, and price of resources. The job analysis helps the administration to determine the operational competence of different aspects of manufacture. However, it is faced by some challenges, thus making the managers turn to cost accumulating (Datar et al.,2018). Job-order is very expensive as it requires the collection of data of different products produced by the firm. Additionally, it needs a lot of secretarial work in designing, approximating expenses, and production arrangement. For example, the organization will use a lot of resources in collecting data of different units as compared to cost accumulating, where charging derived from all the products (Datar et al.,2018).

In job-order, the information of one commodity may be accounted for another product, thus giving the wrong information, thus making it inaccurate. Cost accumulation gives profit and losses as it provides enough time for the managers to work out the expenses and the income (Lafond et al.,2015). Also, it helps in cost controlling as the cost of production is detailed on the whole company. At the same time, in job-order, it is more difficult to control cost as different products have different values of production.

Conclusion

In conclusion, cost accumulation is more advantageous as compared to job-order. For example, it gives time for calculation of losses to be detected and also provides accurate data as there are no products to bring about confusion. In addition, it requires a lot of inputs in terms of man power and other resources. Thus, it will increase the cost of operation for the firm hence it may end up making losses. In a situation where goods are accounted using the wrong data the managers end up making unnecessary steps for the commodity. As a result, the firm will move towards the wrong direction due to misreading information hence, business failure.

References

Banerjee, B. (2014). Cost accounting theory and practice. PHI Learning Pvt. Ltd. Retrieved from: https://books.google.com/books?hl=en&lr=&id=gWbkBQAAQBAJ&oi=fnd&pg=PP1&dq=Banerjee,+B.+(2014).+Cost+accounting+theory+and+practice.+PHI+Learning+Pvt.+Ltd&ots=W-9ff38MSQ&sig=mW7TAjjbFRGPsYxCQPfg_L6DM5Q

Datar, S. M., & Rajan, M. (2018). Horngren's Cost Accounting: A Managerial Emphasis. Retrieved from: https: https://www.hbs.edu/faculty/Pages/item.aspx?num=53893

Lafond, C. A., & Wentzel, K. (2015). Cost accumulation in small businesses: Experiential learning project. Advances in Accounting Education, 16, 45. Retrieved from: https://www.emerald.com/insight/content/doi/10.1108/S1085-462220150000016003/full/html