Cost Accounting Report: Analysis, Discussion, and Decision Making

This report delves into the core concepts of cost accounting, focusing on the analysis of costs to inform managerial decisions. It examines differential costing, comparing costs of different production options, including both variable and fixed costs, to determine the most financially beneficial choice. The report emphasizes the importance of considering all relevant costs when making production-related decisions, highlighting the potential benefits of accepting orders priced below total cost if they exceed variable costs and do not incur additional fixed costs. It concludes by underscoring the significance of cost analysis in optimizing production strategies and maximizing profitability. The report also includes references to relevant academic literature supporting the presented concepts.

Running head: COST ACCOUNTING
Cost Accounting
Name of the Student:
Name of the University:
Author’s Note:

1COST ACCOUNTING
Table of Contents
Introduction:....................................................................................................................................2
Discussion:.......................................................................................................................................2
References:......................................................................................................................................4

2COST ACCOUNTING
Introduction:
Cost accounting is a tool for managing the cost to achieve the overall organizational goal.
In this paper, some cost accounting concepts and techniques are discussed briefly for better
understanding of the cost accounting (Klychova et al., 2015).
Discussion:
Differential costing analyses the cost component of two or more alternative options of
production. It takes into consideration all the expected costs to be incurred in those possible
production options. It not only considers the variable costs, the fixed costs are also considered
while calculating the differential costs for alternative options. The differences between costs of
two or more alternative options are calculated comparing total expected costs of those options.
Based on such a differential analysis one best option, which increases the revenue, is considered
viable and selected for further proceeding.
In the second argument the manager considers that every sale needs to carry a fair share
of full costs that is why he oppose to accept an order priced at below the total cost of the product.
The decision of accepting an order below the costs may be favorable in some cases. In certain
situations, if it is possible to produce some extra units of output without incurring any extra fixed
cost then accepting an extra order below the total cost but at a price more than the variable cost
may make some extra profit for the company (Fullerton Kennedy & Widener, 2014). If it
requires incurring extra fixed costs in delivering the order then total costs of the product needs to
be considered for checking viability of the option.

3COST ACCOUNTING
In conclusion, it can be said that, while taking some managerial decisions related to
production, cost components should be analyzed and those options should be selected which
gives the best result to the company.

4COST ACCOUNTING
References:
Fullerton, R. R., Kennedy, F. A., & Widener, S. K. (2014). Lean manufacturing and firm
performance: The incremental contribution of lean management accounting
practices. Journal of Operations Management, 32(7-8), 414-428.
Klychova, G. S., Zakirova, A. R., Zakirov, Z. R., & Valieva, G. R. (2015). Management aspects
of production cost accounting in horse breeding. Asian Social Science, 11(11), 308.