The Function of Cost Accounting

The Function of Cost Accounting

The Function of Cost Accounting

Cost accounting utilizes two procedures:

1. Historical Costing. This method makes comparisons between the costs incurred during different periods of time, different products or different sales areas.

2. Standard Costing. In this case one establishes predetermined costs and subsequently makes a comparison between the actual costs which are incurred and the predetermined standard which has been set. The differences between the two sets of figures are known as variances. These variances denote the degree of inefficiency which exists in the performance of the particular operations concerned.

The Merits of Cost Accounting

It will be seen that, by highlighting the variances which exist between prescription and performance, cost accounting provides the ONLINE MARKETING Manager with a most convenient method of exercising control over the selling and distribution processes of the ONLINE MARKETING operation.

Whereas the unit cost of the manufacture of a product usually reduces as volume output increases, the cost of sales promotion tends to increase as sales grow. It is, therefore, not unusual to find that the cost of attracting additional business is considerably greater than the unit cost of maintaining the current sales level.

The great merit of cost accounting in the control of the sales and distribution budget, is that one is constantly required to review one's methods, which is an excellent discipline. It may be found that the cost of ONLINE MARKETING certain products in certain markets makes the operation less profitable than one had previously imagined. Industrial products manufacturers will often discover that the cost involved in supplying certain customers with comparatively small quantities of the product, or 'tailor-made' versions of the product, makes the business uneconomic and the company may be better off without it.

The principle of controlling one's actual costs against the yardstick of standard costs will immediately pin-point any deviations which are occurring in the performance of the ONLINE MARKETING plan and remedial action can be instituted. The benefits which can accrue may have wide application. Thus, stockholding can be more efficiently organized. Items of stock which are slow moving will be highlighted and means for their disposal arranged. Warehouse location can be planned with greater accuracy. The size of sales territories and the establishment of optimum calling frequencies for the salesmen can be organized far more effectively if one has the guidance of the statistical evidence which cost accounting can provide.

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Please Note

The Trade is, of course, a major source of product ideas. All manufacturers examine, with avid interest, the new products of their competitors.