CHAPTER 1:
INTRODUCTION
1.1 Background of the Study
The studies of modern cost accounting yield an insight into both the accountant and management roles in an organization especially with relation to product costing. Management in most cases wants to know how to determine the cost of the products and often depend on cost accounting information for guiding their decisions. Decision making can be seen as making purposeful choosing from among a set of alternative cause of action in light of some objectives.Cost accounting information has a main purpose of accumulating cost of an organizational products and services. Managers of manufacturing companies can use cost accounting information as a guide in setting selling prices and for inventory valuation and profit determination (Adeniyi, 2000). However, this research is aimed at determining the relationship between cost accounting information and product costing in some selected paint manufacturing companies in Port Harcourt, Rivers State, Nigeria. It is worthy to note that cost accounting is a process of collecting, analyzing, summarizing and evaluating various alternative courses of action. Its goal of the information obtained from cost accounting is to advise the management on the most appropriate course of action based on the cost efficiency and capability.
Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future including product costing.Since managers are making decisions only for their own organization, there is no need for the information to be comparable to similar information from other organizations. Instead, information must be relevant for a particular company. Cost accounting information is commonly used in financial accounting information, but its primary function is for use by managers to facilitate making decisions (Wikipedia, 2015). Unlike the accounting systems that help in the preparation of financial reports periodically, the cost accounting systems and reports are not subject to rules and standards like the Generally Accepted Accounting Principles (GAAP). As a result, there is wide variety in the cost accounting systems of the different companies and sometimes even in different parts of the same company or organization. According to Adeniyi (2000), product cost control/reduction involves the predetermination of cost and comparison of predetermination budgeted or standard cost with the actual cost. Product costing which is closely linked with the budgeted is predetermined per unit cost, usually analyzed into elements including Direct Material, Direct Labour and Factory overhead. Standard cost is an effective aid to control, due to the link with budget plans and decision making, because it represents anticipated cost, that is, a cost which will exist in the future and is likely to be affected by decisions made by the management.
Leave a Reply
You must be logged in to post a comment.