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Handbook of Budgeting, 6th Edition by William R. Lalli

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CHAPTER TWELVE

Cost-Accounting Systems: Integration with Manufacturing Budgeting

Paul D. Warner, PhD, LLM, CPA

Hofstra University

Edward Mendlowitz, CPA

WithumSmith+Brown

INTRODUCTION

The purpose of this chapter is to identify the basic cost-accounting system options available for accounting for the manufacturing costs of a company. A cost system is necessary for reliable product costing and pricing, the execution of plans and budgets, and timely management reporting of operations that permit cost control and the identification of cost-reduction opportunities. The various cost-accounting systems described in this chapter do not represent discrete alternatives; the cost-accounting system selected by a company frequently combines features of the various options.

A properly designed cost-accounting system should be integrated with the organization’s structure and budgeting system. Budgets are structured according to area of responsibility and represent the financial implications of a plan; the cost-accounting system provides a system for reporting against the plan as well as for cost control over manufacturing operations.

Although this chapter does not discuss the other information systems within a manufacturing environment, the cost-accounting system must function in harmony with the systems depicted in Exhibit 12.1. Information needs and data collection required to maintain the cost-accounting system are dependent on and interact with other information systems.

Exhibit 12.1 Manufacturing ...

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