Question

Why is the design of a cost system so much more complicated today than it was when cost accounting was in its infancy?

• Your initial post should be at 200-300 words, formatted and cited in current APA style with support from at least 2 academic sources.

Answer 1

The design of a cost system has become so much more complicated today than it was when cost accounting was in its infancy. This is primarily due to significant changes in business environment that took place at the end of 20^th century and the beginning of the 21^st century. It should be noted that the focus of cost system during its infancy stage was on the manufacturing cost and on the ways of allocation of indirect manufacturing costs to the concerned product or service. However with the advancement in technology and changes in customer’s preferences the manufacturing companies today are facing a real time challenge for survival. This makes the traditional cost system no longer relevant today.

Today the design of a cost system also focuses on the potential areas in which a manufacturing concern can reap possible cost savings. Thus the design of a cost system today is more focused on cost rationalization as well as cost reduction. The cost system today takes into consideration the fact that manufacturing companies today cannot control or regulate the market prices of their goods but can certainly control their costs. As such the design of a cost system has changed and become more complicated today as the changing business environment requires the cost system to focus on total costs through the whole product life cycle of the product being manufactured.

(228 words)

References:

1. Anthony, R. N., Hawkins, D. F., & Merchant, K. A. (2011). Accounting: Text and cases 13th edition. New York: McGraw­Hill/Irwin.
2. Lucey T., (1996), Costing, DP Publications, London.