Cost accounting
Cost Accounting
Cost Accounting (pronunciation: /kɒst əˈkaʊntɪŋ/) is a branch of Accounting that involves the process of recording, classifying, analyzing, summarizing, allocating, and evaluating various alternative courses of action for the control of costs. Its goal is to advise management on the most cost-effective strategies for enhancing a company's profitability and overall efficiency.
Etymology
The term "Cost Accounting" is derived from the English words "cost" (from Latin costa meaning "rib, side, flank") and "accounting" (from Old French aconter meaning "to account, reckon").
Related Terms
- Direct Cost: A direct cost is a price that can be directly tied to the production of specific goods or services.
- Indirect Cost: Indirect costs are costs that are not directly accountable to a cost object (such as a particular project, facility, function or product).
- Fixed Cost: A fixed cost is a cost that does not change with an increase or decrease in the amount of goods or services produced or sold.
- Variable Cost: A variable cost is a corporate expense that changes in proportion to production output.
- Overhead Cost: Overhead costs are all costs on the income statement except for direct labor, direct materials, and direct expenses.
- Cost Driver: A cost driver is the direct cause of a cost, and its effect is on the total cost incurred.
- Cost Object: A cost object is anything for which a separate measurement of costs is desired.
- Cost Center: A cost center is a department or function within an organization that does not directly add to profit but still costs the organization money to operate.
- Cost Unit: A cost unit is a standard measure of quantity used for costing, budgeting, and financial reporting purposes.
- Cost Behavior: Cost behavior refers to the way different types of production costs change when there is a change in level of production.
- Cost Volume Profit Analysis: Cost Volume Profit Analysis is a method of cost accounting used in managerial economics.
- Activity Based Costing: Activity Based Costing is a method that identifies the activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.
- Standard Costing: Standard Costing is a part of cost accounting that involves deriving a standard cost for the production of goods or services, and comparing it with the actual cost incurred.
External links
- Medical encyclopedia article on Cost accounting
- Wikipedia's article - Cost accounting
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