If you work in a role with a financial or commercial focus, it’s essential you understand costing.
Cost accounting involves looking at the products and services a business sells or projects it undertakes and analysing the associated costs.
A key measure of success for any business is profitability, and the only way to determine this is to subtract costs from revenues. You must, therefore, be aware of the business’s costs in the first place.
Without a detailed knowledge of costs and their relation to products, services and projects, you can’t measure financial performance. Further, you can’t make strategic decisions to optimise profitability, and may not be aware of losses until it’s too late.
In this guide, we introduce you to the most important cost accounting methods and concepts, including the following:
- What costing is and we use it in accounting
- Coding systems
- Fixed and variable costs
- Stepped costs
- Markup and profit margin
- Break-even point
- Absorption and marginal costing
- Budget variance analysis