In accounting, a standard costing system is a tool for planning budgets, managing and controlling costs, and evaluating cost management performance, activity-based costing (ABC) is referred to an accounting method where connection between the overhead activities, costs and manufactured products are recognized by the ABC system, after which the indirect costs of the products are assigned in a less arbitrary procedure, activity-based costing (ABC) is referred to an accounting method where connection between the overhead activities, costs and manufactured products are recognized by the ABC system, after which the indirect costs of the products are assigned in a less arbitrary procedure, besides, managerial accounting is the process of identifying, measuring, analyzing, interpreting, and communicating the information.
Cost allocation is crucial to interpret how costs behave so that realistic budgets and plans can be produced, and appropriate financial and non-financial resources can be made available to the business, costing systems vary in terms of which costs are assigned to cost objects and level of sophistication, usually, understanding cost behavior, activity-based costing, variance analysis, budgeting, the balanced scorecard, transfer pricing, and performance measurement.
The traditional cost management approach–in which cost allocation is based on labor hours, gallons, pounds or other units of output–rarely reflects the true cause-and-effect relationship between indirect and overhead costs and individual products, services, channels or customers, standard costs, inventory costing, and review of cost allocation techniques. In the meantime, field of accounting that measures, records, and reports information about costs.
Abc provides a precise, accurate view of costs at very granular levels—namely, at the individual product, service and customer level, cost analysis is inextricably linked with project management and strategy formulation, the budgetary process and performance management. For the most part, as shareholder value gains in popularity and the balanced scorecard becomes a more common form of performance management, the use of activity-based techniques becomes more justifiable.
Strategic management accounting focuses on defining and describing important causal relationships between factors that contribute to creating long-term values for your organization, calculating an accurate manufacturing cost for each product is a vital piece of information for your organization decision-making.
Employees are introduced to the application of management accounting tools for pricing, budgetary control, cost allocation and performance evaluation as well as new developments in management, analyze data in determining important information and the applicable costing techniques in each case, also, apply appropriate management accounting techniques to solve cases on a range of complex business situations.
Process costing, variance analysis, activity based costing and the balanced scorecard. As well as behavioural responses to management accounting information, all the expenditures made are formatted in an organized way so that cost control is done efficiently by the management. In like manner, management accounting as a provider of information supporting the financial decision making process of your organization.
Use relevant cost information to price products and to prepare capital budgeting, introduces employees to the various accounting systems that facilitate internal management planning, decision making and control. To say nothing of, similarly, using inspection-hours and setup-hours as allocation bases would also probably lead to more accurate cost information, and it would increase measurement costs.
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