Unit first cost accounting

The role of various cost concepts in decision making process

decision making is central to the management of an enterprise. The manager of a profit making business has to decide on the manner of implementation of the objectives of the business, at least one of which may well relate to allocating resources so as to maximize profit. All organizations, whether in the private or the public sector, take decisions, which have financial implications. Decisions will be about resources, which may be people, products, services, or long term and short term investment. Decisions will also be about activities, including whether and how to undertake them. Where the owners are different persons from the manager (for example, shareholders of a company as separate persons from the directors), the managers may face a decision where there is a potential conflict between their own interests and those of the owners. In such a situation cost considerations may be evaluated in the wider context of the responsibility of the managers to act in the best interests of the owners. The name of my project is " The role of various cost concepts in decision making process " In this assignment I am trying to define the cost first then show how they are playing role in different situation. The costs that I discuss about are as follows: Manufacturing costs Non-manufacturing costs Fixed costs Variable cost Absorption costing Variable costing Opportunity costs Sunk costs Product costs Period costs Differential costs Standard costs Direct cost & Indirect cost Mixed cost.

n management accounting, cost accounting is the process of tracking, recording and analyzing costs associated with the products or activities of an organization. Managers use

cost accounting to support decision making to reduce a company's costs and improve its profitability. As a form of management accounting, cost accounting need not follow standards such as GAAP, because its primary use is for internal managers, rather than external auditors, and what to compute is instead decided pragmatically. Costs are measured in units of nominal currency by convention. Cost accounting can be viewed as translating the Supply Chain (the series of events in the production process that, in concert, result in a product) into financial values. There are at least four approaches: Standardized Cost Accounting Activity-based Costing Throughput Accounting Marginal Costing / Cost-Volume-Profit Analysis Classical Cost Elements are: Raw Materials Labor Indirect Expenses / Overhead Contents [hide] 1 Origins 2 Standard Cost Accounting 2.1 Weaknesses of Standard Cost Accounting for Management Decision Making 2.2 The Development of Throughput Accounting 3 Activity-based costing 4 Marginal Costing 5 See also

nderstanding the behavior of costs is of vital importance

to managers. Understanding how costs behave,

whether costs are relevant to specific decisions, and how costs are affected by income taxes allows managers to determine the impact of changing costs and other factors on a variety of decisions. In Part I, we defined and determined the cost of a product or a service. We now focus our attention on the nature of those costs and how they are used in decision making. As production volume changes, some costs may increase or decrease and other costs may remain stable, but specific costs behave in predictable ways as volume changes. This concept of predictable cost behavior based on volume is very important to the effective use of accounting information for managerial decision making.