Understanding Cost Accounting

---

Cost accounting is a major tool in internal decision making because it helps describe your company’s total cost of manufacturing. It accomplishes this goal by assessing the variable costs of each step of production, including both variable and fixed costs. By utilizing cost accounting we can set up cost control programs to improve net margins for the company. Since this is an internal process, we can customize it to your specific need without having to follow any guidelines. In fact, cost accounting can look different between two departments in order to track their needs.

• Standard costing: Ties standard costs to your inventory and costs of goods sold instead of assigning actual costs to create your variance analysis
• Activity-based costing (ABC): categorizes operating costs from each department and assigns them to specific cost items, such as goods or services
• Lean accounting: the objective here is to decrease waste while increasing productivity
• Marginal costing or cost-volume-profit analysis: Measures the effect on the cost of a product by adding one additional unit into production. It is a valuable tool for short-term financial decisions.

Most bookkeepers and accountants are ill-equipped to create and properly manage a cost-accounting system to control your expenses and that gives the best outcome for that business. As a business grows, its cost accounting needs change, customization for every kind of business is what we’re best at. At Full Cycle CFO, we add value by doing extensive cost accounting management so your business can effectively manage Internal financial data and also help your businesses make the decisions to improve overall operations. Cost accounting helps you make decisions about costs in the business that either help with generating profit or don’t. In line with that, a solid cost accounting system helps with budgeting and planning your business strategy. Don’t be left in the dark about your costs, let Full Cycle CFO take care of it.