Executive Summary This report is written for a manger to understand why it is important for a manger to understand the cost structure and behavior. The way cost structure and cost behavior will impact on the profitability of the business. The discussion is focus on the cost structure and cost behavior. The role of the cost structure and cost behavior that impact on the profitability of business. This paper will give a main idea about the cost structure and cost behavior and also the importance of the cost structure and cost behavior to turn the business profit.
Once operations begin, cost accounting reveals how efficiently the work is being done, where the strong and weak spots are, and how to improve performance. The cost of making a product or providing a service is one of the most critical in a firm’s ability to meet the competition. With cost information to support the decisions, management can issue directives, perform follow up activities, and obtain the operating results that ensure prosperity and growth of the enterprise which I will elaborate more on the second question. In the first question, I may or may not have directly or indirectly answered the second question but I will try my best to elaborate on a few key points as to how cost accounting can help organizations develop innovative new products and achieve continuous improvement. Cost accounting can be viewed as the intersection between financial and management accounting.
Differences between Job Order Costing and Process Costing Fundamentally, the two polar extremes of product costing are usually labeled job-order costing and process costing. Product costing is an averaging technique. The unit cost used for inventory purposes is the result of dividing some accumulated cost by some measure of production. The basic distinction between job-order costing and process costing is the breadth of the denominator: in job-order costing, it is small; but in process costing it is large. (Horngren, C, 1967).
Why? iii) Which departments & functions control the final pricing decisions? iv) How can pricing be changed to gain an advantage in the industry? The return on companies developing a globally recognizable pricing capability is very high. Companies recognising this can easily set prices that will maximise revenues & market share along with increasing profits and delivering sustained competitive
Besides, in managerial decision-making; the contribution is used as a tool. It is more trustworthy in decision making. In stock valuation of some proportion of current years fixed overhead, the illogical carry forward can be prevented. Marginal costing also shows more obviously the effect on profit of variations in the capacity of sales. It expenses off large amount of balances left in overhead control accounts which represents the trouble of determining precise overhead recovery rate.
Every small business requires resources so that it can operate effectively. At the same time, owners are always in search of the methods to reduce their operating costs to the minimal rate preserving a high quality of their services and not losing the loyalty of their employees and clients. Generating more revenue is quite possible when you decide to reconsider your operating costs strategy. Here are a few steps that will help you facilitate running your business and create more opportunities for development. 1.
It is the sensible process by which financial and HR managers decide the direction of the company in terms of profitability and progress purposes (Wildavsky, 1986). In fact, in employees’ budgeting, personnel cost is the biggest cost, a company or business sector incurs to carry out trade functions. Hence, efficient budgeting can be foundation stones for the beginning of any new project or advancing organization by way of smartly plummeting expenditures. In addition, prevailing economic situations globally and domestically, allocation of resources and financial plan, and staffing’s need play a crucial role in determining personnel budgeting. Moreover, while planning and executing personnel budgeting, wages, bonuses, commissions and incentives apart from the employer-paid costs are deliberated by financial committee and managers to devise sound and comprehensive budgeting
Further more, assigning cost in process costing is that it allows managers to get detailed information on the production statistics of individual departments or workgroups and it is best suited for continuous manufacturing settings, such as factories and utility companies. The costing process help manager Process costing simplifies record keeping by relying on statistical calculations rather than actual inputs. As an example, consider a construction contractor using a job order costing system. The clothing factory has to keep track of all the cotton, needle, thread and other materials used on the job, as well as tracking workers ' lunch breaks and hours worked. Finally process costing gives managers the advantage of being able to ascertain the same qualities in entire departments and compare performance over time.
There are many different cost and structures that need to be considered when forming a profitable business. A companies expansion can play a role in how some of these concepts are engaged. Furthermore, understanding the level of success a company has can be measured in multiple ways. In this paper I would like to discuss the types of costs a company can expect to have, and they ways these cost can be determined and understood. Then closing with an explanation of how these can affect an expansion of our business and profits.
In business, cost is usually a monetary valuation of effort, material, resources, time & utilities consumed, risks incurred, opportunity foregone in production & delivering of goods or services. All expenses are costs but not necessary all costs need to be expenses. Example, Acquisition of an income generating asset. Important Methods of Costing used by Reliance Digitals: Reliance Digitals mainly follows the operations method of costing. Operations play a important role in Reliance Digitals.