Role of A Cost Accountant
Jun 13, 2016
I recently spoke with a client concerning their cost accounting department. This particular organization was a manufacturer of automotive related products with a sophisticated cost system. The company had a number of full-time employees specifically devoted to maintaining and developing the costing system. Our conversation, however, involved the various expectations and standards this CFO should anticipate from the cost department.
Of course, there is a different answer for virtually every business which maintains a costing specialty area. However, from my perspective, what cost accountants do can generally be broken down into three general areas.
First is to maintain cost information on the products the company is producing. This maintenance includes a constant review of existing standards, noting changes in processes or products which result in a change of cost. The goal of the cost accounting team is to maintain up-to-date and accurate product costs. Such information should be based on actual data being produced on the floor or to original standards and rates that were used to develop the cost at the beginning of the period. This is an ongoing assignment which requires frequent attention and constant focus on what is occurring on the shop floor. In addition, the job requires the ability to anticipate needs from the management team related to product costing.
Second, cost accountants provide management controls of operations. Many costing systems are still based on the standard cost method which includes variance reporting by department, by product, by a person, or by a process. Such reporting can be utilized to compare standard cost data in relationship to actual results. In some cases, reporting of such management information is completed very regularly, maybe hourly or maybe daily, and issued in reports to the various management team members. However, other components may be reported on less frequently. For instance, overhead variance calculations should probably be done no more frequently than once a month. These variance calculations are generally done for the purpose of improving management control and usually result in very specialized periodic reporting to a variety of individuals. based solely on their ability to impact or improve the costing results based on the data that they have been provided to them from the cost accounts.
The third general category of assignments cost accountants frequently work on are related to specialized projects. I have worked with accounting teams which were charged with determining the profitability of certain parts, or a specific manufacturing location. Others have included assignments related to make vs. buy or outsourcing of a product to a foreign country. In this particular instance, special assignments included those related to products previously produced by the company and analyzing costs to determine if it would be more cost-effective to have these parts produced elsewhere. There are also special projects which help to determine how efficient a specific apartment may be or how efficient a given process is over the another. Other cost accounting specialized projects include assistance with determining a capital expenditure and the criteria to be included on simple payback or rates of return to assist management in making a capital improvement decision.
As I think about the wide array of assignments in which cost accountants are associated, I believe this general list of categories included the most common. However, as I said earlier, every firm is different and can include a wide diversity of other assignments that are unique to their industry or their location.
Categories: Cost Accounting