In The World Of Accounting, Cost Accounting Serves As Managers

Activity-based costing can be defined as the managers allocate costs depending on the quantity of resources a product or service consumed in the manufacture of goods and services. The activity based

3. Cost Accounting – A vital piece of management accounting, it fulfils both inward and outer groups to the association and is for the most part concerned with costs, costing and cost conduct.

Managerial accounting is essential for decision making. Making the best choice depends on the manager's goals, the anticipated results from each alternative, and the information available when the decision is made (Schneider, 2012). The different techniques associated with managerial accounting are very helpful in the decisions that need to be made. In order to truly understand decision making with managerial accounting one must first discern exactly what managerial accounting means and some of the techniques associated with it. The definition of managerial accounting will be discussed along with the techniques of cost management techniques, budgeting, and quality control.

Activity-based costing (ABC) methodology is an instrument designed to provide accountants and managers with valuable costing information that will allow them to make sound strategic decisions. It is used as a secondary methodology rather than a replacement for the company’s primarily costing system. The ABC methodology identifies activities in an organization and for each activity it assigns a cost. The cost reflects the actual resource consumption by each activity that has been identified.

ABC is a method utilized by organizations to establish costs for each product or service that the business provides. The ABC method utilizes cost drivers to determine indirect cost, as well as direct costs and volumes to ascertain costs that pertain to the product or service that the business delivers (Nowicki,

Data must be collected, verified and entered into the system. ABC does not conform to GAAP so a company will need two accounting books, one for internal and one for external. The data can be very easily misinterpreted, decision making entails identifying which costing data is relevant for decisions on hand.

Cost accounting is a type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance (Cost Accounting, n.d.).

Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.

Cost accounting is used to help management understand how much it cost to run a business. Understanding the role of cost accounting is important when one is trying to put together a team of managers to help run the company. The CEO of a merchandising organization needs to hire a CFO to run the accounting system, but the CEO has little understanding of cost accounting. The CEO will hire a consultant to help her understand the role of cost accounting, the role of ethics in cost accounting, and compare and contrast the absorption and variable costing.

Nowadays, we know that activity based costing system assigns overhead costs to products or services products that using a two-stage process, which focuses on activities. ABC is a relatively new and very important topic in managerial accounting. ABC allows us to find a way that we could determine the profitability of every product, profitability of every customer we serve, and the profitability of our process. Contents in brief, first that comparing potential advantages of ABC versus traditional costing methods. The

Activity-based costing (ABC) is an accounting method that allows businesses to gather data about their operating costs. Costs are assigned to specific activitiesuch as planning, engineering, or manufacturingnd then the activities are associated with different products or services. In this way, the ABC method enables a business to decide which products, services, and resources are increasing their profitability, and which are contributing to losses. Managers are then able to generate data to create a better budget and gain a greater overall

C. T. Horngren, A. Bhimani, S. M. Datar, G. Foster (2005), 'Activity-Based Costing', Management and Cost Accounting (Prentice Hall Europe), 345-363

Blocher et al (2013), says that the ABC system is relatively new to cost accounting; however, some industries within the government and non-profit agencies use the system for improving cost determination. Additionally, the ABC system is utilized to maximum profitability, while ensuring adequate resources is available to meet demand (Kirche et al, 2005). However, in order for firms to adopt a costing system, managers must understand how beneficial the system can effectively improve the firm’s profits. An ABC system identifies gaps in the old-style accounting systems and recognize the relationship between products and customer. Furthermore, the system identifies high impact areas for process improvements (Kirche et al, 2005). At the same time, based on traditional reasoning, changes in production technology, competition and other related factors underlie giving up on costing (Rof, 2012). In order to develop a costing system tailored for a specific firm, managers and management accountants, must be aware of the relationship between the firm’s resources, activities, and products or services (Blocher et al, 2013).

Traditional costing system was introduced decades ago to meet the demand of management accounting in the manufacturing firms. This was vital to facilitate the allocation of overhead costs

Cost accounting, as a tool of management, provides management with detailed records of the costs relating to products, operations or functions. Cost accounting refers to the process of determining and accumulating the cost of some particular product or activity. It also covers classification, analysis and interpretation of costs. The cost so determined and accumulated may be the estimated future costs for planning purposes, or actual (historical) costs for evaluating performance. The Institute of Cost and Management Accountant (ICMA), London, defined cost accounting as “the process of accounting for cost from the point at which expenditure incurred or committed to the establishment of its