Cost accounting systems

In practice there are two major classifications of cost accounting systems, job costing and process costing. In the former, costs are col-lec ted for each job or batch irrespective of the accounting period. This system is normally used in construction work. Process costing is normally used in continuous and semicontinuous processes. Costs are collected for a specific accounting period. 

The purpose of this subsection is to outhne the basic elements of a pollution-prevention cost-accounting system that incorporates both traditional and less tangible economic variables. The intent is not to present a detailed discussion of economic analysis but to help identify the more important elements that must be considered to properly quantify pollution-prevention options. 

OTA found two principal threats to validity of the methods used to estimate cash outlays per success 1) the small number of NCEs in the samples, especially in the Hansen study and 2) the reliance on unverifiable cost data that responding companies supplied. Although most companies were capable of estimating the costs associated with discovery and development of particular NCEs with reasonable accuracy, inherent differences in the structure of cost-accounting systems across companies introduce potential inconsistency and bias. More importantly, any company that understood the study methods and the potential policy uses of the study s conclusions could overestimate costs without any potential for discovery. Thus, the motivation to overestimate costs cannot be discounted. 

Clinical Period Cash Outlays-OTA s interviews with pharmaceutical company managers indicated that, once projects reach the clinical stage, virtually all companies have project-level cost accounting systems that keep track of funds spent on speckle projects, generally identified by the chemical or biological compound. Therefore, most firms have the ability to report data on overall clinical period outlays. 

For accountability to work, there must be a way to count success or failure There must be an accounting system. Many companies use a cost accounting system (discussed further in Section 35-5) for accidents. Managers must receive the cost data for it to have relevance for the department or organization. Other data may provide a way to organize the performance data. Examples are using severity, type of accident, and location. The additional breakdown may help the manager identify what to correct. 

A cost accounting system that did not reflect the actual operations of the business had a significant impact on the way PlumbCo s management viewed the company. This distorted view caused it to make many decisions that led to deterioration in the company s profits. 

Generally the effects of trade-offs are assessed in two ways from the point of view of their impact on total costs and their impact on sales revenue. For example, it may be possible to trade off costs in such a way that total costs increase, yet because of the better service now being offered, sales revenue also increases. If the difference between revenue and costs is greater than before, the trade-off may be regarded as leading to an improvement in cost effectiveness. However, without an adequate logistics-oriented cost accounting system it is extremely difficult to identify the extent to which a particular trade-off is cost-beneficial. 

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