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Role of Cost Accounting and Ethical Consideration

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Role of Cost Accounting and Ethical Consideration

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  • Feb. 2009
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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 of accounting that record, measures, and report information about how much things cost within the organization. Cost accounting is used in the following organization: manufacturing, merchandising, and service companies, governments, universities, and not-for-profit and profit-making enterprise (Maher, 1994, p.3). The role of cost management plays in helping an organization to maintain a competitive advantage by creating more value at a lower cost by efficiently managing an organization’s value chain of activities, processes, and functions (Hilton, 2005).

The information from the cost reports should be interpreted and presented in a way that will be useful for management. Budget is the key for planning and controlling. The budget contains cost accounting data. Management will not be able to set an optimal price for a product or service can not be decide without knowing the cost of what is to be sold (Griffin, 2008). Cost accounting has traditionally considered a manufacturing support system. The cost object of an organization is the cost of anything that management believes is important. For example, the cost object could be the cost of running a department for the year, the cost of a product, the cost of a bank...