The Role of Cost Accounting in Cost Control.

Abstract In one sense, the role cost accounting plays in cost control might be likened to the part that an inspector plays in quality control on the production lint. The production processes are established after careful engineering studies and planning. Quality is maintained by physical inspection and testing by the inspector. The accounting procedures have been established so as to accumulate facts concerning costs in a scientific manner adapted to the production system. However, the role of cost accounting differs from that of the inspector in that cost accounting also assumes a partial responsibility for the establishment of economical and efficient production procedures. The role that cost accounting plays assumes more importance when the methods and techniques developed are applied to costs to acquire and costs to distribute. Under various cost concepts, these same techniques can be applied to retail, wholesale, and service businesses. The imputed cost concept may be useful in determining profitability of departments. The cost accountant must recognize that there are limitations to the use of cost data in controlling costs. The improper cost concept may be used and the facts distorted. Other external and internal factors may outweigh the cost data presented resulting in necessary decisions just the opposite of cost facts. Accumulating cost facts can be a heavy expense. Unless the results obtained from the work performed to obtain the cost figures can be used to reduce costs or provide adequate control of present costs, the cost accountant must curtail his cost efforts. The guideposts for the business are built from the framework and structure of the cost accounting system. The cost accountant's role within the business structure is here to stay. Industry should continue to progress on its directed path as long as management keeps alert to the ever changing costs of the firm.