Explore cost accounting concepts


Cost accounting is a form of managerial accounting that aims to capture a company's total cost of production by assessing the variable costs of each step of production, as well as fixed costs, such as a lease expense.

Cost accounting in Finance provides important insights into the cost efficiency and capacity of the managerial decision-making processes. It empowers cost controllers and cost center managers to control, classify, allocate, and analyze costs of current operations and plan for future changes.

Because Cost accounting analysis content highlights variances between the actual costs and budgeted costs, managers can be notified about positive and negative trends for their operational units. Managers can drill down to the cost element hierarchies or individual cost elements. In this way, managers can gain detailed insight into how cost variances have occurred, and then take effective action.

The Cost control workspace in Cost accounting > Cost control is designed as a page. Therefore, all managers who are responsible for a cost object can be granted access. You can control access to the page and data in the form.

Control the list of reports available for users, such as managers, by setting the Published option on the Cost control workspace configurations page.

A manager can select the fiscal calendar period to view. The session date is used to determine the default current period.

The values in the fiscal calendar period are determined by the report name and the fiscal calendar selected for the cost accounting ledger that is associated with the report name on the Cost control workspace configurations page.

In the cost object dimension hierarchy, users can select the aggregation level at which balances should be shown. By enabling access-level security, you control the permissions so users can view the entire hierarchy. However, users are only able to view balances for chief officers, such as the CEO and CFOs, who have been granted access.

Users can customize the columns on a report to fit their requirements.

Users can drill into the details behind the balances shown in the workspace. If users select a cost element dimension hierarchy node, and then select View details, the Cost element details dialog box shows detailed information for the node.

Screenshot depicts the Cost Control Window. The View details function is highlighted.

A grid shows each cost element that is associated with the cost element dimension hierarchy node and its values. The columns that appear in the grid match the workspace settings. Two charts show a summary of actual versus budget and budget variance by period.

Screenshot depicts the grid of cost elements associated with their respective cost element dimension hierarchy node and its values. Screenshot also includes two charts showing the summary of actual versus budget and budget variance by period.

Users can select Cost entries to drill down into the entry details as required in Cost accounting > Cost control > ... > View details > Cost entries.

Screenshot depicts the Cost entries view. For each entry, the view displays the cost object, accounting date, debit, credit, amount, cost element dimension member, cost behavior, and version.

For example, rent is an expenditure that is distributed to cost centers. A user who wants to understand the rent cost that his or her cost center must carry can drill down to view how rent has been calculated.

To learn more about cost accounting, access the corresponding links in the Summary unit at the end of this module.