Cost Pools and Cost Objects

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Topic 6: Management Accounting and Cost
Case: Shelter Partnership

a.My main learning outcomes from Topic 6 and the Case Study; 1)Firstly, I realize management accounting has much to offer. Somehow I can handle physics but not accounting. Now thanks to this course I can appreciate and make sense of it. The bit that really caught my attention was seeing how management accounting can be really useful for business planning, cost management, budgeting and performance measurement. It offers critical and more objective inputs for decision making. On my part, I would say this is one of my most important learning outcomes as it changed my personal view and outlook of accounting.

2)I have learnt that a good costing system is needed to get a better grip on the “actual” cost of my products and services. Gaining a better understanding of the Cost Pools (and the types of cost) and how these costs are allocated to the Cost Objects is a good starting point.

3)I realize that it is very important to identify and define the Cost Objects properly from the start. While I may like to define the Cost Objects narrowly, it should only be done to the extent it is economically viable.

4)I recognize that there are a number of ways to allocate indirect costs (from the Cost Pools) to the Cost Objects and these can cause distortion. It is therefore imperative to establish a meaningful and acceptable way of allocating such cost to better reflect the true cost. This leads to my next learning outcome.

5)Stephen Covey’s “begin with the end in mind” rings true here. If I had wanted to measure and analyze the Cost Objects by products, services and countries(Multinational Company), both the Cost Objects and the way cost is allocated needs to be defined early. In this case, a deeper engagement between my Marketing Department and the Finance Department is necessary to fine tune the costing system.

6)When looking at the cost numbers, it is...
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