Scope of Cost Accounting

Scope of Cost Accounting

Cost accountants interpret results and report them to management and provide analyses that assist decision-making in the following departments of a firm:
a) Manufacturing
Cost accountants work closely with production personnel to measure and report manufacturing costs. The efficiency of the production departments in scheduling and transforming materials into finished units is evaluated for improvements as a result of cost accounting knowledge.
b) Engineering
Cost accountants and engineers translate specifications for new products into esti- mated costs; by comparing estimated costs with projected sales prices, they help management decide whether manufacturing a product will be profitable.
c) Systems Design
Cost accountants are involved in designing Computer Integrated Manufacturing (CIM) systems and databases corresponding to cost accounting needs. The idea is for cost accountants, engineers and system designers to develop a flexible 12 production process that suits market needs.

d) Treasury
The treasurer use budgets and related accounting reports developed by cost accountants to forecast cash and working capital requirements. Detailed cash reports indicate where there are excess funds to invest or where cash deficits exist and need to be financed.
e) Financial accounting
Cost accountants work together with financial accountants who use cost information in valuing inventory for external reporting and income determination purposes.
f) Marketing Department
Marketing department involves the cost accountant during the product innovation stage, the manufacturing planning stage and the sales process. The marketing department develops sales forecast to facilitate preparing a products manufacturing schedule. Cost estimates, competition, supply, demand, environmental influences and the state of technology determines the sales price that the product will be offered and will command in the market.
g) Personnel Department
Personnel department administers the wage rate and pay methods used in calculating each employees pay. This department maintains adequate labour records for legal and cost analysis purposes. Cost accounting cannot be emphasized as simply an information system designed to produce information to assist the management of an organization in planning and controlling the organization’s activities. It also assists the management to make informed decisions so as to enable the organization to operate at maximum efficiency and effectiveness.

 

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