Measurement Of Cost Behavior And Cost Management

Cost accounting is used by most companies whether manufacturing or service to keep track of their daily activities. It is essential in understanding the costs of running any enterprise. In other words they aid in determining the costs of inputs and outputs used in production. It involves analyzing and evaluating different approaches in order to determine the most suitable method that management can use suitably and one that can aid in future planning. Cost accounting is therefore an essential tool in decision making. Decisions made may involve pricing levels, future investment, production levels and coming up with a good competitive strategy. Different industries use different cost accounting method depending on the type of services provided or product manufactured.

Managerial accounting is essential for decision making. Making the best choice depends on the manager's goals, the anticipated results from each alternative, and the information available when the decision is made (Schneider, 2012). The different techniques associated with managerial accounting are very helpful in the decisions that need to be made. In order to truly understand decision making with managerial accounting one must first discern exactly what managerial accounting means and some of the techniques associated with it. The definition of managerial accounting will be discussed along with the techniques of cost management techniques, budgeting, and quality control.

As the manager of an individual Costco store, I need different kinds of information than an outside investor who is considering lending money to the company or investing in common stock. I need information that can help me make a sound decision to either add or discontinue certain products (Freedman, 2016). I will also use activity based costing techniques to help determine to whom to sell products, so advertising to the targeted consumers will be cost effective. Controlling the cost is a very important part of my job (Callen, 1991). The information that I need affects the costs of day to day operations unlike the investors who only need an annual report to make an investment decision (Edmonds, Olds, & Tsay, 2008). Cost can be controlled by measuring the ex post performance within the department or in comparison to other departments in the same industry (Callen,

Hi Conster, cost behaviors impact businesses in the way that if the raw material increases, the finished goods will also increase. For instance, every year the price of the steel goes up; therefore, any product build with steel will have an impact on their prices to cover up the increase in paid for the raw material (Edmonds,

The management then uses information about cost behavior to understand how future costs might change and affect profitability as operations changes (Scott & Demand Media, n.d). In any case, when reviewing and reporting, understanding variable costing supports decision-making since cost behavior affects profitability. The management also reports about the operating income to help determine the best alternative. Product pricing and budgeting are elements of decision making that impact sales revenue, net income and hence profitability.

Various terms are used to describe costs. Having an understanding of these terms will provide a better insight to managers and companies on making budget decisions, efficiently. Not only the ones described above should be considered, but also all types of costs related to the decision in effect. Efficient managers will considered all aspects related to the analyses in question.

Narong, D. K. (2009). Activity-Based Costing and Management Solutions to Traditional Shortcomings of Cost Accounting. Cost Engineering, 51(8), 11-22.

Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.

Cost accounting is not a solution to management problems. It is a management tool designed to provide information that facilitates sound decisions. The two primary objectives of cost accounting are 1) to match cost with revenue and 2) to match resource consumption with the units of service provided.

Through the case study, I learnt that a proper Cost Accounting System is very important in a company. Without the accurate system, a company is unable to maximize the profit from the product sold. The product price might be charged too high (over-priced) or too low (under-priced). All these will

By reviewing the literature there is a different approach to this issue, a new way of thinking and acting towards cost management as a beneficiary of multiple opportunities and provides assurance of significant success. Various authors, after detailed research and supporting facts have reasonably concluded that the strategic way of managing cost in most cases is an undisputed necessity which reference should definitely order to achieve the required effect and gained competitive advantage in today's dynamic business environment. Academic authors have stressed that the importance of strategic cost management has grown dramatically in recent years due to intensified competition.

C. T. Horngren, A. Bhimani, S. M. Datar, G. Foster (2005), 'Activity-Based Costing', Management and Cost Accounting (Prentice Hall Europe), 345-363

Management accounting is described as “a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organisations strategy” (Blocher, et al., 2009). Many Changes in the business environment have occurred in recent years which have caused substantial adjustments in cost management practices leading to a contemporary business environment. These changes in the business environment have caused management accountants to respond by implementing and innovating specific management techniques to better implement strategy in these dynamic times. Also in looking at

|Course Code |MBA 625 |Course Name |Corporate Finance | |Date | |Due date |Week 4 | |Maximum Marks |100 |Weight |20% | |Learning Outcomes |LO1, LO2 ,LO3,LO4,LO5 | |Student Name | |

Cost behavior is one of the most important aspect which helps in analyzing the nature and responses of different costs. Generally the cost behavior is breakdown of costs into fixed and variable components. The cost behavior is usually analyzed with the help of CVP analysis. The cost behavior patterns are analyzed by cost-volume-profit analysis, including the calculation of a firm 's break-even point in units and sales dollars.