Role of Cost Accounting and Ethical Consideration

RUNNING HEADER: Role of Cost Accounting and Ethical Consideration Role of Cost Accounting and Ethical Consideration Introduction Cost accounting is used to help management understand how much it cost to run a business. Understanding the role of cost accounting is important when one is trying to put together a team of managers to help run the company. The CEO of a merchandising organization needs to hire a CFO to run the accounting system, but the CEO has little understanding of cost accounting. The CEO will hire a consultant to help her understand the role of cost accounting, the role of ethics in cost accounting, and compare and contrast the absorption and variable costing. Role of Cost Accounting Cost accounting is the area†¦show more content†¦Ethical analysis needs to be instutionalized as an integral part of phases in decision making process. Compare and Contrast Absorption and Variable Cost It is important for the CEO is the manufacturing organization to understand the different between absorption cost and variable cost. One different between the two are the way accounting treats fixed manufacturing overhead. Absorption cost is all the manufacturing overhead costs applied to the manufactured goods (Hilton, 2003). Variable cost is applied to work in process as product cost, and fixed overhead costs are expensed as period cost. Other different is the timing of when fixed overhead becomes an expense. Variable fixed cost is expense immediately, and absorption fixed cost is inventoried until the goods are sold. Fixed cost is expense in both accounting system. Both systems have advantages and it will be up to management to decide which works best for their organization. Below is a list of each system advantages: â€Å"Advantages of Absorption costing †¢ Fixed MOH is treated as the same as other product costs, e.g. DM, DL †¢ Consistent with long-run pricing decisions that must cover full cost †¢ External reporting and income tax law require AC Advantages of VariableShow MoreRelated Cost Accounting: Its role and ethical considerations Essay1054 Words   |  5 PagesCost Accounting: Its role and ethical considerations Introduction: Accounting is the process of identifying, measuring, and communicating economic information about an entity for the purpose of making decisions and informed judgements. 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