1 st Year Core Consulting Classes Columbia Business School Management Consulting Association Guidebook 2002 Please do not duplicate, copy, print or photocopy 11 Objective of Cost Accounting Cost accounting is used to determine the cost of producing different products in order to make more informed managerial decisions. Based on the type of decision to be made, different components of cost can be included. For example: • When deciding the minimum price for which you can charge to obtain a large order, only the direct costs need be considered. • When pricing a product for general sale, all costs need be considered. Definitions Cost Object: The unit whose “true” cost you are trying to determine (i.e., a TV set). Direct Costs: All costs that can be tied to the cost object in some economically feasible way (i.e., the cost of the glass for the screen). Indirect Costs: All costs that should be allocated to the cost object, but are not directly linked to any one unit (i.e., factory manager’s salary).
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This note was uploaded on 08/08/2009 for the course CBS casebook taught by Professor Professor during the Spring '09 term at Acton School of Business.