Anda di halaman 1dari 14



Setting goals is a piece of cake. Meeting

these goals is a tough nut to crack. In a
business environment or a company, managers
set goals to meet short-term and long-term
expectations and projections. These goals are
in the form of standards and budgets and are
established for three main reasons namely: for decision making, to
monitor manufacturing and for overall performance measurement and
evaluation. A company sets its budget, estimates sales, selling price,
costs of production and selling expenses of which most estimates are
taken from recent operations. After which, budgeted data are compared
with actual data.

This semester we learned how to create budgets, analyze sales &

profit data in different scenarios, compute variances from comparing
actual data & budgeted data and creating income statements using either
the absorption costing or direct costing. An accountant may engage in
management advisory services. The subject helped me understand how
accountants are able to provide such services. With the use of CVP
Analysis, Short-term Budgeting, Variable & Absorption Costing and
Standard Costing, accountants are able to get data relevant for
formulating advices to help company management.

Lessons are best learnt through application. Theoretical lessons

won't always compensate or prepare us for what we would encounter in the
actual setting. The purpose of this study is to get a glimpse of how a
specific company create their budgets & plan for certain goals. We always
get the outside view of a company unless were part of the management.
Viewing the company from the managements perspective is a whole new
experience. In the course of our interview, the interviewee mentioned
that costing should coincide with the business nature and the production
process. Their business cannot implement these and those specific costing
procedures due to complexity of operations and other factors.
Costing and budgeting are lengthy & intricate processes. Yet it is
essential for decision making and setting ground for overall company
performance. Having completed this semester, if not ready, at least I
am eager to learn more. Although still a bit confused and thoughts are
slightly muddled, to be able to learn, not just for compliance purposes,
is integral for the profession we aim.

Cost accounting systems vary by

business, since there are no standards for
how they are to be constructed. This differs
from financial accounting systems, for
which there are comprehensive sets of
standards such as GAAP and PFRS. This is
the main reason why I dont like the subject from the beginning. I know
its wrong to hate this subject knowing how important it is for a business
to thrive especially for a manufacturing business. So, to be able to
understand and prove the significance of cost accounting, particularly
CVP Analysis, Master Budgeting, Variable Costing and Standard Costing,
our research team went to various manufacturing entities to conduct an
interview regarding the abovementioned topics.

The team went to a guitar manufacturing company as their first,

but unfortunately they were not able to provide us the information that
we needed. They were prohibited by the owner to divulge any information
about their cost system because it might be used by their competitors
and might threaten their footing in the market. But nonetheless, our
time and visit were not wasted because they toured us around their
production house and showed us how intricately guitars are made. With
that, we have learned valuable information and were still grateful for
the experience.

Lesson learned: A companys cost information system is significant for

it can be used by players competing in the same market as a leverage,
which is why most companies keep their cost information confidential to
protect themselves and their position in the market. In addition, I
noticed that small manufacturing entities or family owned manufacturing
businesses dont pay crucial attention to their cost accounting system
or dont even have one. They rely mostly on their past experiences for
their cost, old suppliers or suki for their material purchases and
market or competitors prices for pricing. These factors eliminate the
need for small businesses to put emphasis on their formal cost accounting

After the groups failed first attempt, we decided to interview a

huge corporation in Mactan Economic Zone Authority (MEZA). We sent a
formal letter asking permission to conduct an interview for the research
interview and attached therein is a list of our possible questions for
the interview. But, unfortunately our request was declined because the
management will not be able to answer our questions regarding the topics
considering that their company is using a Japanese standard costing
system that is not applicable in the Philippine setting. The company
applies the same cost accounting system used by their parent company in
Japan and their cost accountant is also a Japanese, so its really hard
to obtain the needed information from the company.

Lesson Learned: Since cost accounting does not follow any standards,
every company has their own discretion on how they will prepare their
costing system and have the full liberty of choosing the treatment of
such cost. Most companies have their modified cost accounting system
that will be applicable for their specific businesses. The cost
accounting system of Company A may not be applicable to Company B. That
makes cost accounting flexible in so many ways but at the same time it
gets even more complicated to comprehend.

The group felt hopeless after losing our second possible

interviewee. But then, we remembered that we had a classmate before who
worked as a Finance Controller in a seafood manufacturing business. We
then called her and asked if we can meet her for an interview and she
accepted our request without hesitation. We hoped that our questions
will be answered then and we can obtain all the necessary information
to complete the research. We met and conducted a successful interview
with Miss Oyangoren and we were able to gather enough answers to complete
our research paper.
Lesson learned: After the interview, we can already testify that
potential profit can be lost if companies do not know the correct cost
of their product, clients, and channels or even neglect the importance
of cost accounting, Cost-Volume-Profit Analysis, Standard and Variance
costing and all other cost drivers that affect the business as a whole.
Having a master budget as the companys blueprint for the next years
operation is the best way to translate the business financial goals and
objectives into reality. Putting great emphasis to the importance of
proper costing system helps companies to design processes and effective
cost center hierarchies to gain insights into cost drivers to identify
inefficiencies, especially product costs to enable adequate analysis.
This helps every entity to obtain timely insightful information, focus
on business drivers and helps enhance the available capacity (people,
infrastructure, resources, etc.).

For the entire Accounting 109 experience, from the first day of
classes down to the last day of this research, it still did not make me
dislike cost accounting a little less. On a personal note, it made me
affirm that the concepts and data written on our books are so
theoretical, not realistic and are usually not followed in the real
business world. Cost accounting dont really have any standards nor
boundaries to follow, so as long as its applicable then its usable.
My brain doesnt work that way. I live for standards and principles and
I work best when I follow the rules and cost knows no rules.

Do I hate cost accounting? A big, YES! Is my mind closed to the

idea of liking cost in the future? Certainly, not.

I may not like cost before, I may not like cost right now, and I
may not like it more in the future, but in the end of the day its really
not about WANTING to take the medicine but the NEED to take it. And
right now, I need more dosage of Cost Accounting.

Cost accounting was developed as a separate

discipline in accountancy, and promoted
efficiency in resource utilization stated by
Rakesh Singh, Institute of Cost Accountants of
India (2014). International Federation of
Accountants (IFAC) highlights the importance
of cost accounting to organizations: The creation, operation,
alteration, and cessation of every action and function in an
organization, whether within the private, public, or voluntary sector
all incur costs. Costingthe accumulating and assigning of costs to the
organizations various activitiesenables the organizations cost
structure to be understood, explained, and improved. The guidance
recognizes the importance of costing in assessing organizational
performance in terms of shareholder and stakeholder value. It informs
how profits and value are created, and how efficiently and effectively
operational processes transform input into output. It includes product,
process, and resource-related information covering the organization and
its value chain. Costing information provides feedback on past
performance but should also be used effectively to motivate future

As a BSA student, I should also give importance to cost accounting

for the fact that its one of the fields that I could probably do in the
future. Not just the cost accounting formulas itself, but also the
underlying cost accounting standards. As we all know there is no specific
PFRS or PAS standards nor GAAP principles that governs cost accounting
here in the Philippines but in India they have, under the Cost Accounting
Records Rules set by their government, where Generally Accepted Cost
Accounting Principles have been clearly defined and well documented in
the form of the Cost Accounting Standards. What am I pointing out? The
point that no specific guidelines can be referred when asking questions
of why is it companies treat such costs the way they treat it might lead
to lack of uniformity in preparation and presentation of cost statements.
Cost accounting standards would provide a structured approach to
measurement of costs in manufacturing process, would integrate,
harmonize, and standardize cost accounting principles and practices, or
provide guidance to users to achieve uniformity and consistency.
Facilitating and promoting uniformity and consistency not only helps in
better understanding of all the related issues by companies, but it also
helps various user organizations, government bodies, regulators,
research agencies, and academic institutions.

Additional to that, managers must give importance to cost

accounting because it is developed primarily to serve the needs of the
management. Through cost accounting, management can take steps to
eliminate or to reduce those activities from which no profit or little
is earned. It can change the method of production in order to render
such activities more profitable, such as cost-volume-profit analysis
where it can be used to calculate companys breakeven point or margin
of safety. With that, the company can assess its companys performance
in the present with the previous years and can make decision carefully.
Also, it provides accurate cost data to the management which help in the
fixation of selling price and for submitting quotations. In periods of
depression it enables the management to determine the extent to which
prices can be reduced. Cost accounting is a benefit to the employer by
establishing standards to measure the efficiency of labor to assist in
assignment of work to employees best fitted for it, and to determine the
unit cost of labor arising from each activity.

In conclusion, cost accounting taught in school is like teaching

us how to budget our own money, although students only have allowances.
It teaches us how to be rational regarding decision to reduce misuse of
resources. In business, using standard costing, it can determine
variances, either under or over absorbed. With CVP analysis, the company
can charge the right price of a product for it enough to absorb the
variable and fixed costs, and to have enough profit. Relating it to life,
cost accounting teaches us to prioritize direct materials that we need
to live each day. To insert efforts in everything that we do and those
luxurious things be charge as our factory overhead as a reward of our
perseverance in doing great in life.

Cost accounting is all about costs, how

they behave, how they should be accounted and
how they can be controlled.
To know how something behave is important
in predicting how it will be in different
situations. This is evident in the case of
costs. Once you know the behavior of your
costs, you can manipulate it in the way you
can minimize them.
Costs incurred in producing units of goods can behave differently.
Some costs may be constant in varying levels of productions. Some may
be changing along with the changes in levels of production. And some may
act both. Once you classify your costs according to these categories of
behavior, you can now plan your desired profit. Your desired profit may
be achieved in adjusting your sales and costs.
Also, you can now start budgeting or planning how your production
process costs will be in the upcoming periods. this entails standard
costing where every cost of your materials needed in your production
process is estimated and is compared against the actual costs your
production incurred. This budgeting is important since this can establish
an imaginary line which your costs incurred must not surpass this line
but your efficiency must at least step on this line.
Costs are something we can control. We just have to have the right
and enough knowledge about it then we can now forecast how it will be
in different circumstances.
The things mentioned above are what we have learned throughout the
semester. As we learn about the subject, we thought that what was in the
book was all the things we need to know.
But as we have done our interview with someone who is in the
industry, she concluded that what we learned in the book isn't always
what is practiced in real world. From what she said to us, the accounting
for their costs in their company is not like what was explained in books,
at least not all applications said in books. What they applied was based
on what is best for the company and what is most convenient for them.
What they do doesn't coincide with what was in the book. It only concludes
that cost accounting should always depend on what is applicable and
convenient for the entity but should still comply with the accouning
standards and principle.

The Interview was very fun and remarkable

not just in our mind but also in our heart, as
we shared a little time, we gain a lot of
knowledge and new learning about management
services. The interview helps to broaden our
knowledge in terms of management services
expertise. I enjoy the run of the interview because I conceptualized
from my learning in school into reality, that help me give an idea on
how to apply and make decision appropriately. From small details to the
fullest I appreciate all given information not just to comply our
research project but it also give us an idea to reality that we can keep
in our mind forever. As we interview the management staff I am like
refreshing my mind, from the first topic to the last topic in our class,
because we divided our task. Each topic has an assigned person to
formulate question to that particular topic assigned. And by that, for
me it is like a recap all the topics in our cost accounting subject, not
just a recall we also gain an additional knowledge from it.

Cost accounting is very important in management services because

it use by the management for budgeting, planning and controlling. A
budget is a formal written expression of the plans for a specific future
period stated in financial terms. It provides definite objectives for
evaluating performance at each level of responsibility. It creates an
early warning system for potential problems so that management can make
changes before things get out of hand. It facilitates the coordination
of activities within the company by correlating segment/division goals
with overall company goals. It results in greater management awareness
of the company's overall operations including the impact of external
factors such as economic trends. It motivates personnel throughout the
company to meet planned objectives. The master budget is the set of
interrelated budgets for a selected time period. The specific parts to
the master budget are the operating budgets and the financial budgets.
The operating budgets begin with a sales budget derived from the sales
forecasts provided by the marketing department, followed by the related
unit production budget with detail budgets for direct materials, direct
labor, and factory overhead. Finally a budget for selling and
administrative expenses provides the final information needed for a
budgeted income statement. The financial budgets, based on data from the
budgeted income statement, are composed of a cash budget, a budgeted
balance sheet, and a budget for capital expenditures.

Budgetary control is the process of comparing actual operating

results to planned operating results and thereby identifying problem
areas in order to take corrective actions. In taking corrective actions,
one must be aware of whether or not a manager is responsible for a
particular cost that has been incurred. While all costs are controllable
at some level of responsibility within a company, only the costs that a
manager incurs directly are controllable by them. Any costs that are
allocated to the manager's responsibility level are non-controllable at
the manager's level.

From the basic in classifying cost, to make master budget and until
prepare financial statements. The standard costing play a vital role,
it is the tool use by the management to control cost. All the topics are
related to each other. I realized you must know the very basic beginning
so that it can easy for you to proceed to the next topic.

Cost accounting is one of the different

types of accounting systems that fall under
management accounting. It is a system that has
been developed to provide managers with a
structure to examine the day-to-day finances
of the company. From the information gathered,
managers can make decisions on where to cut
costs to improve the companys profitability. However, cost accounting
is one of those fields that is underrated. Most of the companies that
faced financial failure neglected the importance of management
accounting for use inside the organization in planning, scheduling,
controlling and decision making.

Understanding the topics in cost accounting is quite difficult

especially when a person cannot relate due to lack of experience and
exposure to its application. When the team had the interview with Ms.
Angelita Oyangoren, I realize how vital cost accounting is in a certain
firm in merchandising industry in order to accumulate costs, accurately
measure them and decide for activities that would bring benefits to the
organization. However, as we throw questions to her, we found out that
there are some theories written in our book remain to be just theories,
too flawless to be utilized by companies. But this is not to say that
all is deemed to be pointless, it is just that policies on cost treatment
varies in different firms. We asked about how they separate their costs
into fixed and variable components and not surprised that the real
application is more sophisticated than the discussion we had in class.
There are so many things to consider. The interview also gave us a look
in the actuality of other lessons that we had, such as CVP Analysis,
Short-term budgeting and Variable costing. It leads us to take CVP
analysis as a useful tool for businesses because it leads them to
consider cost behavior, profit planning, and break-even analysis. Short-
term budgeting, on the other hand gives detailed estimates in terms of
quantities and amounts to acquire for raw materials, number of units to
produce and maintain in the inventory at the end of the month. This is
done to ensure that a practicable course of action can be chalked out
and the actual performance corresponds with the estimated or budgeted

Running any business requires immense responsibility. Because

although everything wont go exactly as it was planned and variances
will not surprisingly exist, the company need to plan. Theres no such
thing as perfection, but budgeting is better than to have no plans at
all. The company design processes and effective cost center hierarchies
to gain insights into cost drivers to identify inefficiencies, especially
product costs to enable adequate analysis. This helps firms obtain timely
insightful information, focus on business drivers and helps enhance the
available capacity.

The concepts that underlie in every topic that we discussed are

very useful in dealing with actual business setting, especially in
manufacturing concern. "If you can measure it, you can improve it." This
is what cost accounting offers: IMPROVEMENT. Management is highly
benefitted with the introduction of cost accounting. It helps to
ascertain the cost and selling price of the product sufficient to exceed
the product and period costs and earn a desirable profit. Furthermore,
it also helps manage the costs more efficiently by determining the wastes
and losses the company can actually avoid. Hence, no potential profit
can be lost. When one has a good understanding of costs, he/she can
ensure his/her company survives, thrives and places high in the

Management accounting is very useful to

the management when it comes to decision-
making. This accounting process provides
information that helps the management to plan
for the future, control cost, and to take
specific actions in order to maximize
shareholder's value in a cost-efficient way. Decision making is one of
the primary tool of the management in getting its job done. Insufficient
information can lead to damaging results that is why adequate information
is needed to come up a rational decision. Information must be reliable,
relevant and timely quantitative in supporting the financial statements.
The ultimate objective of a company's operation is to make the best
profit performance out of the resources used. To achieve that, companies
usually reduce their expenses to increase their profit, however, reducing
expenses requires a complete understanding to be controlled and managed.
Cost varies proportionately to the organization's levels of activity or
production referred to as variable cost, and that what makes profit
unpredictable. But with good strategic planning and cost effectiveness,
the company can avoid incurring losses.

In our interview about the Phil. Union Frozen Foods Inc.s

operation costing, I have learned that applying appropriate costing
methods, setting standards, and budgets helps the company increase their
profit. It must be well-designed and be planned carefully because costs
are very sensitive but predictable in a relevant range. There are also
activities that you cant control that will result to variances which
is normal. It may be favorable if the standard cost exceeds the actual
cost and it may be unfavorable if actual cost exceeds standard cost.
Sometimes there is really a need to spend more and to risk more to attain
profit maximization. There are two methods on how to account the fixed
cost which is the variable costing and absorption costing. Although it
is a never-ending debate on how to account fixed cost, I realized and I
agree to the company that fixed cost must be treated periodically because
rent for example depreciation, or utilities incur with or without
production. And for a company in which sales exceeds production, you can
really say that fixed cost per unit is decreasing and it is somehow a
saving on the part of the company.

Cost accounting is not really easy. It is very confusing especially

if it is about factory overhead. But I realized that no matter how hard
it is, it will always be learned. And these learnings are my tools that
would help me in the actual world. Cost accounting or management
accounting is significant especially when it comes to planning. The
learnings that I have obtained gave me an idea on how a manufacturing
works in the accounting's point of view.