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Cost accounting is an essential part of business accounting and plays a crucial role for companies. It makes it possible to analyse a company's cost structure and understand how resources are used. Cost accounting helps companies to control their costs, analyse their Efficiency and make informed decisions. In this article, we will take a closer look at cost accounting and analyse its various aspects.
Key Takeaways
- Cost accounting is important for companies to keep an eye on their costs and to optimise their Efficiency to increase.
- There are different types of cost accounting, such as cost element, cost centre and cost unit accounting.
- Cost accounting enables companies to optimise their processes and reduce costs.
- Overheads are taken into account in cost accounting to enable accurate costing.
- Companies can use the results of cost accounting to optimise their business processes and make well-founded decisions.
The different types of cost accounting: overview and differences
There are different types of cost accounting, including job order costing, activity-based costing and activity-based costing. Each type has its own characteristics and differences.
Job costing is used to determine the cost of specific jobs or projects. It allows companies to track the cost of materials, labour and other resources and determine the profit or loss of a specific order.
Activity-based costing, on the other hand, is used to determine the costs of producing products or services in a continuous production process. It enables companies to track the costs of each production step and identify bottlenecks or inefficient processes.
Activity-based costing is a modern method of cost accounting in which costs are calculated based on the activities required to create a product or service. It enables companies to track the costs of each activity and assess the profitability of individual activities.
How cost accounting can contribute to increasing efficiency
Cost accounting can help companies to identify inefficient areas and improve their efficiency. By analysing the cost structure, companies can identify areas where costs can be saved, e.g. by using more efficient production methods or cutting out unnecessary expenditure.
An example of this is a company that realises that it has high material costs. By analysing the material costs in detail, the company can determine whether it is possible to find cheaper suppliers or reduce material consumption.
Another example is a company that realises that it has high personnel costs. By carrying out a detailed analysis of personnel costs, the company can determine whether it is possible to optimise work processes or deploy employees more efficiently.
The importance of cost element, cost centre and cost unit accounting
| Cost element accounting | Cost centre accounting | Cost unit accounting |
|---|---|---|
| Recording and allocation of costs by type and purpose | Recording and allocation of costs according to areas of causation | Recording and allocation of costs by product or service |
| Basis for the calculation of products and services | Basis for analysing cost drivers and potential savings | Basis for deciding on the profitability of products and services |
| Enables cost development to be monitored | Enables the Optimisation of processes and resources | Enables the identification of profit makers and loss makers |
Cost element, cost centre and cost unit accounting are three important aspects of cost accounting.
Cost element accounting deals with the classification of costs according to their type, such as material costs, personnel costs or overheads. It enables companies to analyse the cost structure and track the costs for different areas.
Cost centre accounting deals with the allocation of costs to the various departments or areas of a company. It enables companies to track the costs for each department and assess the profitability of individual areas.
Cost unit accounting deals with the allocation of costs to a company's individual products or services. It enables companies to track the costs of each product or service and assess the profitability of individual products or services.
How overheads are recognised in cost accounting
Overheads are costs that cannot be directly allocated to a specific product or service but are incurred indirectly, such as rental costs, electricity costs or administrative costs. In cost accounting, overheads are allocated to the various products or services of a company.
There are various methods for allocating overheads, such as percentage allocation based on sales or the Working hoursdistribution based on the consumption of resources or distribution based on specific cost drivers.
An example of this is a company that has rental costs. The rental costs can be allocated to the company's various products or services by allocating them on the basis of sales or revenue. Working hours be divided.
Effective cost calculation: tips and tricks for companies
There are several best practices for costing that can help organisations obtain accurate and meaningful cost information.
One proven method is the use of standard costs. Standard costs are predefined costs that are determined on the basis of empirical values or estimates. They enable companies to compare actual costs with expected costs and identify deviations.
Another tried and tested method is the use of cost centres. Cost centres are specific areas or departments of a company for which costs are recorded. They allow companies to track costs for each area and identify bottlenecks or inefficient processes.
The role of cost accounting in decision-making processes
Cost accounting plays an important role in decision-making processes in companies. It enables companies to make well-founded decisions by analysing the impact of decisions on the cost structure.
An example of this is a company that is faced with the decision to purchase a new machine. By analysing the costs in detail, the company can determine whether the investment is worthwhile. worthwhile and whether the new machines lead to cost savings.
Another example is a company that is faced with the decision to introduce new products. By analysing the costs in detail, the company can determine whether the new products are profitable and whether the costs of producing the new products are reasonable.
Cost accounting as a basis for pricing: how does it work?
Cost accounting plays an important role in the pricing of products or services. It enables companies to determine the costs of producing or providing a product or service and to set the price accordingly.
An example of this is a company that wants to launch a new product on the market. By analysing the costs in detail, the company can determine how much it costs to manufacture the product and set the price accordingly to achieve a reasonable profit.
Another example is a service company that wants to set its prices. By analysing the costs in detail, the company can determine how much it costs to provide the service and set the price accordingly in order to make a reasonable profit.
How companies can use the results of cost accounting to optimise their processes
The results of cost accounting can help companies to optimise their processes and improve their efficiency. By analysing the cost structure, companies can identify inefficient areas and take measures to improve these areas.
One example of this is a company that has high material costs. By analysing material costs in detail, the company can determine whether it is possible to find cheaper suppliers or reduce material consumption.
Another example is a company that has high personnel costs. By carrying out a detailed analysis of personnel costs, the company can determine whether it is possible to optimise work processes or deploy employees more efficiently.
Cost accounting and controlling: How are they connected and what are the differences?
Cost accounting and controlling are closely linked, but have different focuses. Cost accounting deals with recording and analysing costs, while controlling covers the planning, management and monitoring of company processes.
Cost accounting provides controlling with important information about a company's cost structure, which can be used to plan and control processes.
Conclusion
Cost accounting is an essential part of business accounting and plays a crucial role for companies. It enables companies to control their costs, improve their efficiency and make informed decisions. By analysing the cost structure, companies can identify inefficient areas and take action to improve these areas. The results of cost accounting can help companies to optimise their processes and increase their profitability. Overall, cost accounting offers numerous Advantages for companies and is an indispensable tool for management.
