Cost accumulation systems
Generally, cost accumulation is the organized collection of cost data through a set of procedures and systems. According to an accounting business, they used a periodic cost accumulation system. This system only provides limited cost information during a certain period. The system requires end year adjustments to arrive at the cost of goods manufactured. In most cases, it is not considered a complete cost accumulation since the costs of raw materials, finished goods, and work in progress could only be determined after physical inventories are taken. The accounting business is a small firm and hence that is why the accumulation system was applicable for it. It provided continuous information about the raw materials that the business, finished goods, cost of goods produced and manufactured (Lal, 2009). The cost of direct materials, direct labor and factory cost, should first flow through work in progress inventory so hat they could reach the finished goods inventory. Then, the total costs are transferred to finished goods inventory during the period equal to the cost of goods manufactured. The balance of unfinished production at the end of the period is called the finishing work in process inventory.hen Finally is the ending inventory which is the, balance of unsold production at the end of the period. The total operating costs is computed by adding selling, general and administrative expenses to the cost of goods sold (Drury, 2006). Any cost accumulation system will help in decision making of the company. It Is very important and time-consuming task. However, the periodic cost accumulation systems provided all the information, which is cost-related about the company’s operations. This is because the volume of production, which affects costs, varies from period to period. The company used the information to compare various volumes and costs. This was useful to the company since it...
References: Drury, C. (2006). Management accounting for business. London: Thomson Learning.
Lal, J., & Srivastava, S. (2009). Cost accounting. New Delhi: Tata McGraw-Hill.
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