About This Chapter
Cost Accounting for Decision Making - Chapter Summary
There are a wide range of formulas that accounting and financial professionals can use to determine how much it will cost to complete or forgo certain tasks. This type of forecasting is used to help organizations make financially sound decisions, and in this chapter you'll discover how cost accounting influences the decision making process.
Our instructors have designed this chapter for both beginners and more skilled learners. Beginners may need to go through every lesson in the chapter to truly get a grasp on cost accounting. Individuals who have more accounting experience may use the lessons to brush up on particular topics. Those who master all of the information in this chapter will be able to:
- Describe how an organization's mission can be influenced by cost accounting
- Identify techniques for making business decisions by using accounting concepts
- Define the steps for calculating costs and making decisions
- Examine cost accounting practices and how they impact pricing decisions
- Explain variable costing vs. absorption
- Point out examples of differential costs
- Appraise the impact of uncertainty, risk, and certainty on decision-making
- Summarize how Southwest Airlines used cost accounting for making decisions
1. The Impact of Cost Accounting on an Organization's Mission
Explore the alignment between an organization's mission and the type of cost accounting information provided to management. Learn how the cost accounting system provides a link between the mission statement and an organization's strategic objectives.
2. Using Accounting Concepts to Make Business Decisions
There are several accounting concepts that make up the generally accepted accounting principles (GAAP). Using these principles, managers are better able to read and understand financial statements needed to make business decisions.
3. How to Determine Costs & Make Decisions
Determining costs and making decisions are the most important jobs of a manager. In this lesson, we see just how linked the two practices are for businesses of all sizes.
4. Cost Accounting Practices for Pricing Decisions
Cost accounting helps businesses price their products and services. In this lesson, we'll explain how inventory costs affect pricing decisions and explore the differences between cost plus and market pricing strategies.
5. Managerial Decision Making: Absorption vs. Variable Costing
Companies often have many decisions to make regarding setting prices. In this lesson, we look at two ways to set prices, one using absorption costing and the other using variable costing.
6. Differential Cost in Managerial Decision Making
Differential cost calculations are an important part of how managers make the best decisions for their businesses. In this lesson, we'll see how it's used and learn how to a find differential cost.
7. Decision Making for Managers: Certainty, Risk & Uncertainty
Making decisions with the most amount of certainty is something managers learn to do over time. In this lesson, we will review how managers work with certainty and risk in order to make informed decisions.
8. Cost Accounting Case Study: Decision Making at Southwest Airlines
Labeling itself as a customer service company, Southwest Airlines flies airplanes and makes money. This lesson looks into how the company could have used cost accounting to focus on scheduling, fares, and satisfaction as it gained market share.
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Other chapters within the Accounting 303: Cost Accounting course
- Cost Classifications in Accounting
- Costing Methods & Techniques
- Formulas for Cost Accounting
- Standard Costs in Accounting
- Job Order Cost System in Accounting
- Process Cost System in Accounting
- Activity-Based Costing Overview
- Product & Service Costing
- Budgetary Process
- Cost Behavior Analysis
- Cost-Volume-Profit Analysis Overview
- Cost Estimation
- Service Department & Joint Cost Allocation
- Ethics in Cost Accounting
- Modern Trends in Accounting
- Required Assignments for Accounting 303
- Studying for Accounting 303