July 23, 2021 4:51 pm

Cost, Standard Cost, Activity-based cost, Lean, & Marginal cost accounting

Cost accounting records, analyzes and reports all of a company’s costs (both variable and fixed) related to the production of a product. There are four major types of cost accounting daftar judi slot. Standard cost accounting identifies and analyzes the difference between the cost of producing goods and all of the costs that should have occurred to produce said goods. These total costs are known as standard costs. Product costs, direct material costs, direct labor costs and manufacturing overhead costs all factor into the standard costs.

Standard costs are a great planning tool, but in reality, they differ from actual costs daftar slot online. That difference is known as variance. Using standard cost accounting assists greatly in finding variances and investigating the reasons behind them. Activity-based cost accounting (or ABC) identifies activities in an organization and assigns the cost of each activity to all products and services. The five steps of ABC are as follows:

Identify costly activities needed to make the product(s).
Assign overhead costs to the activities identified in step one.
Identify the cost driver for each activity.
Calculate a predetermined overhead rate for each activity.
Assign overhead costs to products.
Activity-based cost accounting can help business owners and managers understand overhead and cost drivers, which can then allow management to reduce or eliminate elements or activities that are costly and don’t provide value to the organization.

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Lean accounting identifies and eliminates waste from operations. Whereas traditional accounting is designed to support mass production, lean accounting focuses on helping managers improve the overall efficiency of their operation. Lean accounting can help a business uncover ways to eliminate waste, improve quality, speed production and improve productivity.

Marginal cost accounting refers to the increase or decrease in the cost of producing one more unit or serving one more customer. To calculate the marginal cost, a business determines the point at which increasing production or service raises the average cost of the item being produced. Understanding a product’s marginal cost can help a company assess its profitability so that management can make informed decisions. It is an important tool to use when setting pricing.

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