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Cost Accounting Jobs

Cost accounting is a facet of management accounting that determines the actual cost associated
with manufacturing a product or providing a service by looking at all expenses within the supply
chain. It is done for the purpose of budget preparation and profitability analysis. The information
derived from this process is useful to managers in determining which products, departments or
services are most profitable and which ones need improvement.
Cost accounting involves determining fixed and variable costs. Fixed costs are expenses that recur
each month regardless of the level of production. Examples include rent, depreciation, interest on
loans and lease expenses. Variable costs are expenses that fluctuate with changes in production
level, such as supplies, labor, and maintenance expenses. These costs are related to production in
that the more units of a product produced, the more expense there is associated with the materials
and labor that went into making the product.

Cost accounting determines both fixed and variable costs associated with a product line to
determine the break even point, and then ultimately the profit. The break even point represents the
point at which expenses are covered by sales. Profit is determined by using the break-even point as
the starting point for calculating profit. All sales beyond the break even point are profit. Determining
the number of units that need to be sold to reach the break even point and then achieve profit is
know as cost-volume-profit analysis.

The Role of a Cost Accountant

While most cost accountants work in government organizations or large companies, some will work
as consultants either through public accounting firms or their own independent practice. Private
consultants will often be called upon to perform services for small or mid-sized businesses that
cannot substantiate the full-time employment of a cost accountant. Those who are employed full-
time will perform a wide variety of duties:

 Providing data for stable budget developments

 Using software to allocate indirect costs to internal processes
 Detailed analysis on suitable cost drivers
 Evaluation of potential business ventures

Cost accountants should be familiar with all of the methods of cost accounting, as well as the
software programs that support cost accounting functions. There are four primary methods of cost
accounting, each of which allocates indirect costs to individual product lines and / or services:

 Standard Costing System assigns an average cost to each direct cost (labor, material,
overhead, etc) associated with a product so as to standardize the cost accounting system.
This is one of the more popular methods of cost accounting used by small and medium sized
businesses because of its simplicity.
 Activity-based Costing determines fixed and variable costs in proportion to the direct cost
associated with a product line.
 Throughput Accounting focuses on the expansion of an organization’s efficiency, by
reducing production bottlenecks and/or limitations and thereby maximizing throughput.
 Cost-Volume-Profit (CVP) Analysis determines total fixed and variable costs based on the
total quantity of products produced. It uses this information to calculate a company’s
breakeven point, or the production level at which it will begin to earn a profit.
While many software packages are specific to particular industries, popular programs include SAP,
Oracle, and JD Edwards. Familiarity with these packages will strengthen a cost accountant’s ability
to perform and analyze data at foundation levels. Cost Accountants should stay abreast of new
developments in accounting technology and trends, to ensure efficiency and effectiveness.