Factors To Consider When Designing A Cost Accounting System

In order to have a good Cost Accounting System, during the stage of designing it, we should consider the following:

The need to have a thorough understanding of the Organization structure, manufacturing process & procedures, selling and distribution process and types of cost information required by the company’s business

The need to select a suitable costing technique re: standard or actual or marginal or absorption cost. The costing technique should conform with the normal industry standard that the business is in.

Plans need to be formulated to ensure propose collating, allocation and absorption of overheads suitable method for booking labour costs on jobs proper methodologies to treat waste and scraps

Relevant forms need to be design to ensure the collection and dissemination of cost data/information

To consider the need to have budgetary control technique so that actual performance can be compare with budgeted figures and variances being properly analyze to enable management to make correct decisions.