Essential Features Of A Good Costing System

1.0 The Cost Accounting system should be simple and customized to meet the business requirements.

2.0 The method of costing should be suitable to the industry and serve its purpose

3.0 The system should consider the organizational structure of the business and it should be designed as a sub-system of the overall organization. There must be proper coordination amongst all departments/division in the organization.

4.0 Costs versus Benefits where the costs of installing such system should be justified by its results/performance

5.0 The system should be effective and efficient to take up all essential details and eliminate unnecessary items/details

6.0 The system should receive full cooperation and participation of executives from all departments

7.0 Preferably there should be an integral relationship between costing system and financial accounts otherwise unnecessary duplication will occur. A single integrated accounting system would be ideal.

8.0 The costing system should be able to ensure:

• Overheads are collected , cumulated and absorb reasonably
• Proper recording of workers’ time and their wages. Wage cost should be determined from wage analysis sheet. Factors like ideal time, overtime, holiday pay needs to be properly recorded and costed.
• Able to provide checks on ordering, receipts, stocking, issuing and recording of materials and that the pricing method and issue of materials should be efficient.