Cost Accounting

What Is Cost Accounting?

Cost accounting is a process companies go through to determine how much it costs to manufacture a product or provide a service in order to decide:

how much they should make,
the price they should charge and
how profitable the product or service is.

The main goal of cost accounting is to determine the breakeven point, above which sales revenue exceeds costs and the company makes a profit. By going through the cost accounting process, companies know how many units they need to sell in order to make a profit.

How Is Cost Accounting Used?

Why Trade Shares with FXCM?

  • $0.00 Commission*
  • Mini Shares - Fractional Share Trading with minimum trade sizes of 1/10 of a share.
  • Low Margin Requirements

Cost accounting is generally used for internal purposes for budgeting and forecasting purposes. It's also used to help management find out how they can operate more efficiently, make better decisions on where to best invest their resources, and plan and budget for the future. The process is not necessarily done to generate external financial statements for investors and other stakeholders, although some of the information gleaned is useful there, such as reporting the cost of inventory on the balance sheet and the cost of goods sold on its income statement.

As a result, the cost accounting process varies from company to company and is not necessarily done according to generally accepted accounting principles.

Cost accounting involves assigning the costs incurred to produce each item. Expenses include materials, labor, fixed and variable overhead, and period costs. Period costs include such things as advertising and marketing expenses, travel and entertainment, sales commissions, and other expenses associated with the final product.[1]

Summary

Cost accounting is a process companies go through to determine how much it costs to manufacture a product or provide a service in order to arrive at the breakeven point, at which point it makes a profit. Cost accounting is useful for several reasons, including planning and budgeting, pricing, making investment decisions and finding efficiencies.

FXCM Research Team

FXCM Research Team consists of a number of FXCM's Market and Product Specialists.

Articles published by FXCM Research Team generally have numerous contributors and aim to provide general Educational and Informative content on Market News and Products.

References

1

Retrieved 03 Apr 2019 https://www.accountingtools.com/articles/what-is-a-period-cost.html

Disclosure
*

When executing customers' trades, FXCM can be compensated in several ways, which include, but are not limited to: spreads, charging commissions at the open and close of a trade, and adding a mark-up to rollover, etc. Commission-based pricing is applicable to Active Trader account types.

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.

Risk Warning: Trading Margin FX/CFDs carries a high level of risk, and may not be suitable for all investors. Leverage can work against you. By trading, you could sustain a total loss of your deposited funds but wholesale clients could sustain losses in excess of deposits.

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}