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Recent Developments in Cost Accounting

Recent Developments in Cost Accounting discusses four recent developments: target costing, life cycle costing, throughput accounting, and environmental accounting. Target costing sets product prices based on customer value. Life cycle costing considers all costs over a product's life from creation to disposal. Throughput accounting focuses on maximizing production flow rates. Environmental accounting integrates environmental impacts and costs into analysis. These developments help organizations better manage costs, align with markets, optimize resources, and consider environmental factors.

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Mirabel Joes
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1K views4 pages

Recent Developments in Cost Accounting

Recent Developments in Cost Accounting discusses four recent developments: target costing, life cycle costing, throughput accounting, and environmental accounting. Target costing sets product prices based on customer value. Life cycle costing considers all costs over a product's life from creation to disposal. Throughput accounting focuses on maximizing production flow rates. Environmental accounting integrates environmental impacts and costs into analysis. These developments help organizations better manage costs, align with markets, optimize resources, and consider environmental factors.

Uploaded by

Mirabel Joes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Recent Developments in Cost Accounting

Student's Name - EduWriter.ai

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Course Details

Instructor's Name

Date of Submission
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Recent Developments in Cost Accounting

Introduction

Cost accounting is a crucial aspect of financial management that enables

organizations to track and control their costs effectively. Over the years there have been

significant developments in cost accounting practices aiming to enhance cost management

and decision-making processes. This paper discusses four recent developments in cost

accounting: target costing life cycle costing throughput accounting and environmental

accounting.

Target Costing

Target costing is a proactive approach used in cost management to set product prices

based on customers' perceived value. It involves determining the desired profit margin and

subtracting it from the target selling price to obtain the target cost. By incorporating

customers' expectations and market conditions target costing helps businesses align their cost

structure with market demands. This approach enables companies to identify cost reduction

opportunities and optimize their resources accordingly (Horngren et al. 2018).

Life Cycle Costing

Life cycle costing is a comprehensive cost management technique that considers all

costs associated with a product or service throughout its entire life cycle from conception to

disposal. It involves analyzing costs at different stages such as research and development

production distribution and post-sales support. By accounting for all relevant costs including

acquisition operating and disposal costs life cycle costing provides a holistic view of the cost

implications associated with a product or service (Bhimani et al. 2019).

Throughput Accounting
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Throughput accounting is a cost accounting method that focuses on the flow of

products or services through an organization's operations. It emphasizes maximizing the

throughput rate which is the rate at which a company generates money through sales.

Throughput accounting recognizes the importance of bottleneck operations and aims to

optimize them to increase overall profitability. This approach enables businesses to identify

constraints and allocate resources efficiently to enhance throughput (Goldratt & Cox 2014).

Environmental Accounting

Environmental accounting is a relatively recent development that considers the

environmental impact of business activities in cost accounting. It involves assessing and

quantifying the environmental costs and benefits associated with an organization's operations.

By integrating environmental factors into cost analysis businesses can identify opportunities

for cost reduction and implement environmentally sustainable practices. Environmental

accounting promotes responsible business practices and supports organizations in meeting

environmental regulations (Schaltegger et al. 2017).

Conclusion

Recent developments in cost accounting such as target costing life cycle costing

throughput accounting and environmental accounting have significantly enhanced

organizations' ability to manage costs effectively. These developments enable businesses to

align their cost structures with market demands consider the entire life cycle of products or

services optimize resource allocation and incorporate environmental considerations into cost

analysis. By leveraging these advancements organizations can make more informed decisions

and achieve sustainable cost management.


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References

Bhimani, A., Horngren, C. T., Datar, S. M., & Rajan, M. V. (2019). Management and Cost

Accounting. Pearson.

Goldratt, E. M., & Cox, J. (2014). The Goal: A Process of Ongoing Improvement. Routledge.

Horngren, C. T., Datar, S. M., Rajan, M. V., Beaubien, P., & Graham, S. (2018). Cost

Accounting: A Managerial Emphasis. Pearson.

Schaltegger, S., Burritt, R., & Petersen, H. (2017). An Introduction to Corporate

Environmental Management: Striving for Sustainability. Routledge.

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