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Extra info for Cost Accounting: Foundations and Evolutions (Available Titles Cengagenow)
This chapter provides the necessary terminology for understanding and communicating cost and management accounting information. The chapter also presents cost ﬂows and the process of cost accumulation in a production environment. Cost Terminology A cost management system is a set of formal methods developed for planning and controlling an organization’s cost-generating activities relative to its strategy, goals, and objectives. This system is designed to communicate all value chain functions about product costs, product proﬁtability, cost management, strategy implementation, and management performance.
Other companies may require customers to return a product if it needs repair. Company managers communicate organizational strategy to all members in the value chain so that the strategy can be eﬀectively implemented. The communication network needed for coordination among internal functions is designed in part with input from cost accountants who integrate information needs of managers of each value chain function. 7 How is a balanced scorecard used to implement an organization’s strategy? Balanced Scorecard Accounting information helps managers to measure dimensions of performance that are important in accomplishing strategic goals.
Raw Material Inventory, Work in Process Inventory (for partially converted goods), and Finished Goods Inventory. Exhibit 2–8 compares the input–output relationships of a retail company with those of a manufacturing/service company. This exhibit illustrates that the primary diﬀerence Exhibit 2–8 Business Input/Output Relationships Retail (Merchandising) Company INPUT OUTPUT Warehouse and/or display (cost carried on balance sheet as Merchandise Inventory) Purchase products for resale Sell, deliver, and bill to customer (cost transferred to income statement as Cost of Goods Sold) Manufacturing/Service Company INPUT OUTPUT The Production Center Purchase raw materials or supplies Warehouse raw materials or supplies (cost carried on balance sheet as Raw Materials or Supplies Inventory) Conversion of production input factors into finished output.