Cost Accounting For Dummies, 2nd Edition

Chapter 1

So You Want to Know about Cost Accounting

IN THIS CHAPTER

Understanding accounting methods

Comparing cost accounting systems

Controlling your costs

Applying a price to your product

Mulling over quality issues

In a nutshell, cost accounting is the process of analyzing and planning what it costs to produce or supply a product or service. The analysis helps reduce costs — and possibly eliminate them. Lower costs, of course, allow for increased profits.

Business folks use cost accounting to determine the profitability of a product. The rule is simple: The price should cover the product cost and generate a profit. Competition may dictate the price charged for a product. In other instances, a profit is added to a product cost to create a unique price.

This chapter introduces cost accounting and how to compare and contrast cost accounting with other accounting methods. The chapter also explains how cost accounting can help you improve your business, such as by using pricing, budgeting, ...