Cost Accounting Or Cost Volume Profit Accounting Essay

990 words - 4 pages

ACC501 Cost Accounting.txt

Cost Accounting or Cost-Volume-Profit Accounting

ACC501 - Accounting for Decision Making
Module 2 - Case

This paper contains a brief overview of the current primary accounting standard GAAP but also explores CostVolume-Profit analysis and Cost Accounting. In the 1980s accountants and financial managers embraced technology and became the basis for the Personal Computer’s (PC) explosive expansion. The abilities of the computer coupled with the needs of business management supported the development of many new accounting tools and processes.

There is universally true method of accounting. The accounting method(s) used in an organization must be ...view middle of the document...

While the management of data for both manufacturing and retail side of business differs the needs of both are similar, whether or
not the organization is profitable. If not, how far away they are from being profitable and which of their plans is not on track or on schedule.

The “CVP” system works well with the, “What if” options built into the computer spreadsheet programs that have become standards over the last 30 years. Accountants and bookkeepers were the core supporters the fledgling PCs for the office. In many instances the PCs were shared between the bookkeepers, accountants and managers all in need a faster way to get their numbers crunched.

With the “What if” option, all the known variables for manufacturing or retail, including direct and indirect costs, can be programmed into the software creating a matrix. Then by changing a single value the entire sheet recalculates giving the user the ability to run many different scenarios as fast as they can come up with them to see the results instantly. Using built in macro’s or desktop capture software the entire “What if” scenarios can be captured played back to support a concept.

While the “CVP” method can be versatile, the limitations in the versatility has caused various accounting groups to
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ACC501 Cost Accounting.txt
come up with other methods of predicting the future. Through the use of the PC’s spreadsheet an accountant can create a series of graphs and charts using them to calculate a number of fixed cost points for a period of time. Then import the resulting data into one of several business models. By adjusting the input data the organizations management team can consider one or more, “best usage” options. With reasonably accurate calculations, management can use the data to plan production or forecast sales for the period in question.

In review, each accounting method was developed with a different application in mind. Generally Accepted Accounting Principles, was developed as a standard for third parties to be able to review the financial health of an organization. Assuming, of course, that there is is no deliberate fraud and concealment on the part of the organization. Cost-Volume-Profit...

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