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The Role of a Cost Accountant

Cost accounting is a branch of accounting that determines the actual cost of operations that the company indulges in. For instance all the processes as well as products and departments and the analysis of the profitability and the social application of the funds of the company are determined by the cost accountant. The cost accounting is used by managers in order to determine the actions that would lead to profits and what can be done in order to maximize these profits. This could also mean the cutting back on the company’s costs. Cost accounting can be considered as one form of management accounting and thus does not has to follow the guidelines of any accounting body or laws. It is solely meant for the internal managers to determine what can be done in order to increase the profitability of the company. The decisions taken by the managers to increase the profits and minimize the costs incurred by the company on various processes is determined on the basis of the reports prepared by the cost accountants.

Cost accounting is not something that is new to this world. It came into being in the days of the industrial revolution when companies started to find out ways to increase profits as well as minimize the costs incurred on factors such as labor, raw material and other overhead expenses.

Some of the Methods of Cost Accounting are:

  1. Lean accounting
  2. Activity based costing
  3. Standard cost accounting
  4. Throughput cost accounting
  5. Cost-volume-profit analysis
  6. Resource consumption accounting

Some of the most important elements that are included in cost accounting are:

  1. The direct or indirect material  
  2. Indirect material or indirect labor
  3. Direct labor as well as indirect labor

All the features of cost accounting can be categorized in the following categories:

  1. Administration over heads
  2. Production or works overheads
  3. Distribution overheads
  4. Selling overheads
Another most important feature of cost accounting is the differentiation between the variable costs as well as the fixed costs. The costs that fluctuate with time are known as the variable costs as well as the costs that remain fixed are known as the fixed costs. The companies take into account both the costs while determining the pricing of the products.