Cost Accounting
I’ve worked for a few distinct companies, all in manufacturing. It’s amazing to me how the cost systems can be so different from one place to the other.
On my initial Cost Accounting appointment I was fortunate enough to be hired into a company that was pro-cost accounting. In truth the CEO demanded that everyone support the effort. We developed an activity cost system that was the envy of many. I can honestly say that the costs were accurate in the system.
Afterward that company was purchased by a big corporation that reduced us down to a very watered down standard cost system. It was miles from where we were. The costs were a joke after having had such a significant system.
Subsequently I went from bad to worse, into a very large corporation that did not worry about costs at all. The engineering unit ran the company. What a disaster that was.
So, from my perspective the worth of cost accounting needs to be explained to individuals that run the companies.
What a misuse for a company to remain making errors in reasoning for the reason that they Don’t know their costs.
Cost accounting is really fundamental to a company’s survival. There are many that think that accounting is a non-value added cost, but how incorrect they are.
If management does not know what a product or service costs, then how can the business be profitable. Surely, some people and businesses are lucky and happen to be profitable in spite of uninformed decisions. However, in the very competitive world we are in, we cannot count on luck.