Introduction to Cost Accounting

Jan 27, 2024

21 Min Read

1. What is the purpose of cost accounting in business and financial operations?


The purpose of cost accounting in business and financial operations is to systematically record, analyze, and report the costs associated with producing goods or services. This information is essential for making informed business decisions, optimizing operational efficiency, and planning for future growth.

Some specific purposes of cost accounting include:

1. Cost control: By tracking and analyzing costs, businesses can identify areas of inefficiency and take corrective action to reduce expenses.

2. Pricing decisions: Cost accounting helps businesses determine the most profitable price points for their products or services by factoring in all relevant costs.

3. Budgeting and planning: The data collected through cost accounting can be used to create realistic budgets and set financial targets for the business.

4. Performance evaluation: Cost accounting allows businesses to measure their performance against targets and identify areas where improvements can be made.

5. Inventory valuation: Cost accounting provides information on the value of inventory held by a business, which is important for financial reporting and tax purposes.

6. Decision-making: Business managers use cost accounting data to make important decisions about product lines, investments, pricing strategies, etc.

Overall, the purpose of cost accounting is to provide accurate and detailed information about costs incurred in a business’s operations, so that informed decisions can be made to improve profitability and drive growth.

2. How does cost accounting help organizations make better decisions?


Cost accounting helps organizations make better decisions in several ways:

1. Accurate cost analysis: Cost accounting provides a detailed breakdown of all costs involved in the production process, including direct costs (such as materials and labor) and indirect costs (such as overhead expenses). With this information, organizations can accurately determine the total cost of producing a product or providing a service.

2. Cost control: Cost accounting enables organizations to identify areas where costs can be reduced or eliminated. By tracking and analyzing costs, companies can make informed decisions about how to streamline processes, eliminate waste, and optimize utilization of resources.

3. Product pricing: Using cost accounting data, organizations can set prices for their products that cover their expenses and generate profits. This helps businesses determine the optimal price point that will attract customers while also ensuring profitability.

4. Budgeting and forecasting: By having a clear understanding of the costs associated with different business activities, organizations can create accurate budgets and make more accurate financial forecasts for future periods.

5. Investment analysis: Cost accounting can also help companies evaluate the potential return on investment for new projects or business ventures by analyzing projected costs versus expected revenues.

6. Performance evaluation: Through cost accounting techniques such as variance analysis, organizations can compare actual costs against budgeted costs and identify areas where performance can be improved.

7. Decision making: Ultimately, cost accounting provides decision-makers with valuable information that they can use to make informed choices about resource allocation, pricing strategies, investment opportunities, and other critical business decisions. This leads to better decision-making processes that are based on sound financial analysis rather than guesswork or intuition.

3. Can you explain the basic principles of cost accounting?


The basic principles of cost accounting are as follows:

1. Cost: This principle states that all costs incurred in the production and sale of goods or services must be properly recorded and classified according to their nature and purpose.

2. Cause and Effect: This principle states that there should be a direct relationship between the cost incurred and the activity or product that causes it. This helps in identifying the factors that contribute to the overall cost.

3. Objective: This principle states that costs should be measured objectively based on reliable data, rather than personal opinions or assumptions.

4. Continuity: This principle states that costs should be recorded consistently over time using similar methods, so that they can be compared for analysis purposes.

5. Matching: This principle requires that expenses should be matched with the revenue they help generate, i.e. costs related to a particular product or service should be allocated to the revenues generated from it.

6. Historical Costs: This principle states that costs should be recorded at their historical value, i.e. the actual amount paid or incurred at the time of purchase.

7. Conservatism: This principle suggests that when there is uncertainty in costing certain items, it is better to estimate higher rather than lower costs. It ensures prudence and accuracy in financial reporting.

8. Materiality: This principle states that insignificant amounts do not require detailed analysis and can be treated as immaterial for costing purposes.

9. Consistency: This principle requires that accounting methods used for recording costs should remain consistent over a given period of time to ensure uniformity in financial statements.

10. Reporting: The final principle suggests that all comprehensive information related to costs must be disclosed in financial statements so stakeholders have a complete understanding of how costs are being calculated and managed by an organization.

4. What are the different methods used in cost accounting for analyzing costs?


1. Absorption costing: This method takes into account all manufacturing costs (direct and indirect) to calculate the per unit cost of a product.

2. Marginal costing: Also known as variable or direct costing, this method only considers variable costs (direct materials, direct labor, and variable overhead) to determine the per unit cost of a product.

3. Activity-based costing (ABC): This method allocates indirect costs based on the activities that consume them, rather than just one overall allocation rate.

4. Standard costing: This involves setting standard rates for material, labor, and overhead costs and then comparing them to actual costs to identify variances.

5. Job order costing: This method is used when products are made to order or in batches and involves allocating costs to specific jobs.

6. Process costing: Used in industries with continuous production processes, this method assigns costs evenly over all units produced during a specific period.

7. Life cycle costing: This approach takes into account all costs associated with a product over its entire life cycle rather than just focusing on the initial production costs.

8. Throughput accounting: Primarily used in lean manufacturing environments, this method focuses on maximizing throughput by reducing inventory levels and minimizing production time rather than traditional cost analysis.

9. Lean accounting: Similar to throughput accounting, this approach emphasizes reducing waste and increasing efficiency in operations.

10. Target costing: A customer-oriented approach that sets target prices for products first and then works backwards to determine the maximum allowable cost for production.

5. How is cost accounting different from financial accounting?

Cost accounting is different from financial accounting in several ways:

1. Focus:
Cost accounting focuses on calculating and analyzing the cost of production or providing a service, while financial accounting focuses on reporting the financial performance of a business as a whole.

2. Purpose:
The purpose of cost accounting is to help managers make informed decisions, control costs, and improve efficiency, while the purpose of financial accounting is to provide information to external parties such as investors, creditors, and regulators.

3. Timeframe:
Cost accounting often deals with short-term data and focuses on day-to-day operations, while financial accounting mostly deals with long-term data and reports on the overall performance of a business over a specific period, typically one year.

4. Audience:
Cost accounting information is primarily used by internal parties such as management and employees, while financial accounting information is meant for external stakeholders such as shareholders and creditors.

5. Regulations:
Financial accounting must follow strict guidelines set by regulatory bodies such as generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS). Cost accounting does not have such strict regulations and can use various methods to allocate costs.

6. Scope:
Financial accounting covers all aspects of a business’s finances, including assets, liabilities, equity, income statement, and cash flows. Cost accounting only focuses on costs related to production or services provided.

7. Type of Information:
The type of information provided by cost accounting includes details about labor costs, materials costs, overhead expenses, and product/service profitability analysis. Financial statements prepared through financial accounting provide an overview of a company’s financial health through the balance sheet, income statement and cash flow statement.

6. How does cost allocation work in cost accounting?


Cost allocation is the process of identifying and assigning shared costs to cost objects, such as products, services, or departments. Cost allocation is commonly used in cost accounting to measure the full cost of producing a product or providing a service.

In cost allocation, indirect costs (also known as overhead costs) are allocated to direct costs based on a predetermined allocation rate. This rate can be based on factors such as labor hours, machine hours, material usage, or square footage.

To begin the process of cost allocation, all the indirect costs for a given period must be accumulated in a single pool. This may include items such as rent, utilities, salaries of support staff, and equipment depreciation. The total amount in this pool is then divided by the total amount of the chosen cost driver (e.g. total labor hours) to calculate the allocation rate.

Once this rate has been determined, it is applied to each individual direct cost item to determine how much of that particular indirect cost should be assigned to it. For example, if the total indirect costs for a month were $10,000 and the chosen cost driver was total labor hours (at 1 hour per $10), then for every direct cost item with 10 labor hours recorded against it would incur an additional $100 in indirect costs ($10 x 10).

This process allows companies to accurately assign overhead expenses to specific products or services and track their full production costs. It also helps businesses make more informed decisions about pricing their products/services and managing their operations effectively.

7. What are the types of costs that are considered in cost accounting?


1. Direct costs: These are costs that can be directly traced to a specific product or service, such as materials, labor and overhead costs related to the production of a specific item.

2. Indirect costs: Also known as overhead costs, these are expenses that cannot be directly attributed to a single product or service. Examples include rent, utilities, depreciation and administrative salaries.

3. Fixed costs: These are expenses that do not change with the level of production or sales. Examples include rent and salaries.

4. Variable costs: These are expenses that fluctuate with the level of production or sales. Examples include raw materials and sales commissions.

5. Semi-variable costs: These are expenses that have both fixed and variable components. An example would be utility bills which may have a minimum monthly charge (fixed) but increase with usage (variable).

6. Opportunity cost: This is the potential gain from choosing one alternative over another. It is the cost of pursuing one option at the expense of another opportunity.

7. Sunk cost: This is a cost that has already been incurred and cannot be recovered, regardless of future decisions.

8. Manufacturing costs: These consist of direct material, direct labor and manufacturing overhead costs involved in producing a finished good.

9. Non-manufacturing costs: Also known as selling, general, and administrative (SG&A) expenses, these include all non-production related costs such as marketing, distribution, research and development, and administrative expenses.

10.Differential cost: This is the difference in total cost between two alternatives considered by management for decision making purposes.

11.Relevant cost: These are future incremental cash flows that will change based on a particular managerial decision.

8. Can you give an example of how activity-based costing is used in cost accounting?


One example of how activity-based costing is used in cost accounting is in a manufacturing company that produces multiple products using the same production equipment. The company may have previously allocated overhead costs to each product based on direct labor or machine hours. However, with activity-based costing, the company can assign overhead costs more accurately by identifying specific activities that consume resources.

For instance, the company may have identified three main activities: machine setup, material handling, and quality control. Each activity would have its own cost driver, such as the number of setups, number of material movements, and number of inspections. By tracking these cost drivers for each product produced, the company can determine the actual usage of resources and assign overhead costs accordingly.

If one product requires more setups and material movements than another, it would be allocated a higher portion of overhead costs. This provides a more accurate reflection of the true cost of producing each product.

Furthermore, activity-based costing can also help identify non-value-added activities and areas for potential cost reduction. If the company notices that one product consistently requires excessive setups or inspections compared to others, they can investigate ways to streamline those processes and reduce costs.

In summary, activity-based costing allows companies to allocate overhead costs more accurately based on usage of resources rather than general indirect measures like labor or machine hours. This information can help businesses make pricing decisions and identify opportunities for cost improvement in their operations.

9. How do overhead costs factor into the overall product cost in cost accounting?


In cost accounting, overhead costs refer to indirect expenses incurred by a business in order to operate effectively. These costs do not directly contribute to the production of a specific product or service but are necessary for the overall functioning of the business.

Overhead costs include expenses such as rent, utilities, salaries of administrative staff, marketing and advertising costs, and depreciation of equipment. These costs are necessary for a business to function but cannot be easily attributed to a specific product or service.

In cost accounting, overhead costs are allocated or spread out among all the products or services produced by a business. This is done in order to accurately determine the total cost of each product and ensure that the correct amount of profit is being earned on each product.

For example, if a company produces 100 units of a product and incurs $10,000 in overhead costs for that period, then $100 will be allocated as overhead cost for each unit produced. This means that in addition to the direct materials and direct labor costs associated with producing each unit, there will also be an added $100 of overhead cost included in the total cost per unit.

Overhead costs can significantly impact the overall product cost and can make up a large portion of it. Therefore, it is important for businesses to carefully track and manage these expenses in order to accurately determine their profits and make informed decisions about their products.

10. What is variance analysis and how is it utilized in cost accounting?


Variance analysis is a technique used in cost accounting to analyze and compare the differences between planned or budgeted costs and actual costs incurred. It involves calculating and comparing the variances between these two sets of costs to identify areas where deviations have occurred and understanding the reasons for such variances.

There are several types of variance analysis methods, including:

1. Price variance: This measures the difference between the actual price paid for a material or resource and its standard or expected price.

2. Usage variance: This calculates the difference between the actual quantity used of a material or resource and its standard or expected quantity.

3. Efficiency variance: This compares the amount of time taken to produce a certain number of units with the standard time required to produce those units.

4. Volume variance: This measures the impact of changes in sales volume on overall profitability.

Variance analysis is utilized in cost accounting to help managers identify inefficiencies, control costs, make informed decisions, and improve performance. It provides valuable insights into areas of cost overruns or savings, identifies potential problem areas that need attention, and supports better decision-making by highlighting areas for improvement or correction. By examining variances in detail, managers can take corrective actions promptly to minimize negative impacts on company profits.

11. Can you discuss the role of budgeting in cost accounting and its importance to businesses?


Budgeting is an integral part of cost accounting and plays a crucial role in a business’s financial planning and decision-making process. It involves estimating and allocating resources to achieve the organization’s objectives within a specific time frame.

The main objective of budgeting in cost accounting is to control and manage costs effectively. By setting a budget, businesses can monitor their spending and ensure that they are not overspending on unnecessary expenses. This helps in maximizing profits and improving the overall financial performance of the organization.

Some other roles of budgeting in cost accounting include:

1. Setting Goals and Objectives: Budgets act as a roadmap for businesses, helping them define their goals, objectives, and priorities. It enables organizations to focus on their long-term vision while also catering to short-term targets.

2. Decision Making: Cost accounting uses past data to analyze future trends and forecast future costs accurately. Budgeting provides management with relevant information for making informed decisions regarding resource allocation and managing costs effectively.

3. Resource Allocation: Budgeting distributes resources to different departments based on their needs, ensuring they have adequate funds to carry out their activities successfully. This leads to efficient resource utilization, resulting in better operational efficiency.

4. Performance Evaluation: Budgets act as a benchmark for evaluating the financial performance of an organization against its targets. It helps identify areas where expenses need to be controlled or increased, enabling businesses to take corrective actions if necessary.

5. Motivation: When employees are aware of budget restrictions, it motivates them to work efficiently and find ways to reduce costs without compromising on quality.

Overall, budgeting is crucial in cost accounting as it provides valuable insights into how an organization is managing its resources while also serving as a tool for planning and controlling costs effectively. It promotes better decision-making, supports goal achievement, aids in resource allocation, drives performance evaluation, and motivates employees towards achieving organizational objectives.

12. How do companies use standard costing to control costs and improve profitability?


Companies use standard costing as a cost control tool to determine the expected or “standard” costs for producing a product or providing a service. These standard costs are then compared to actual costs incurred, allowing companies to identify and analyze variances between the two.

By having a set standard for costs, companies can measure their performance and efficiency in meeting these standards. If actual costs are higher than expected, the company can investigate the reasons for the discrepancy and take action to reduce costs.

This method also allows companies to assess their production processes and identify areas that need improvement. By analyzing variances, they can determine which processes are efficient and which ones require improvement or reevaluation.

Furthermore, by using standard costing, companies can set realistic and achievable targets for their departments or individual employees. This encourages them to work efficiently towards achieving these goals, ultimately driving down costs and improving profitability.

Overall, standard costing provides companies with a benchmark for monitoring costs and identifying opportunities for cost reduction. It helps them make more informed decisions about resource allocation and improve operational efficiency, leading to improved profitability.

13. How is life cycle costing different from traditional costing methods?


Traditional costing methods focus on the costs incurred in producing a product, such as direct materials, labor, and overhead. These costs are usually estimated based on historical data and are used to determine the price of a product.

On the other hand, life cycle costing takes into account the total cost of a product over its entire life cycle, from creation to disposal. This includes not only production costs but also costs associated with maintenance, repair, and disposal. It also considers the impact of environmental factors and the cost of remediation or compliance with regulations.

Moreover, traditional costing methods tend to focus on short-term profitability, while life cycle costing takes a more long-term view by considering the full life cycle of a product. This can help companies make more informed decisions about product design and sourcing materials.

In summary, life cycle costing provides a more comprehensive picture of the true cost of a product and its impact on both financial and non-financial aspects. It goes beyond traditional costing methods by incorporating factors that can significantly affect a company’s bottom line in the long run.

14. In what ways can cost-volume-profit analysis be beneficial for businesses?


Cost-volume-profit (CVP) analysis is a useful tool for businesses in several ways:

1. Helps with pricing decisions: CVP analysis can help businesses determine the optimum price for their products or services by considering the relationship between costs, volume and profit.

2. Assists with breakeven analysis: CVP analysis can help businesses identify the level of sales at which they will break even, meaning that their revenues will equal their total costs.

3. Provides insights into cost behavior: By analyzing the cost structure of a business, CVP analysis can provide information on how costs behave as production volume changes. This can help businesses make more accurate cost projections and budget accordingly.

4. Enables profit planning: CVP analysis allows businesses to project future profits based on different levels of sales, helping them make more informed decisions about resource allocation and investment opportunities.

5. Helps with decision making: By considering various scenarios, such as changes in prices or costs, CVP analysis can assist businesses in evaluating the potential impact on profits and make decisions based on these insights.

6. Facilitates performance evaluation: With CVP analysis, businesses can compare actual performance against projected results and identify any areas where they may be falling short or exceeding expectations.

7. Encourages cost control: By understanding the impact of changes in sales volume on profits, CVP analysis encourages businesses to focus on controlling costs and managing production efficiently to maximize profits.

8. Guides budgeting and forecasting: CVP analysis can be used to develop budgets and forecasts by considering various factors such as planned sales volume, costs and anticipated profits.

9. Aids in setting sales targets: With CVP analysis, businesses can set realistic sales targets that take into account their costs, desired profit margins and market conditions.

10. Helps with strategic planning: By providing valuable insights into the relationship between costs, volume and profit, CVP analysis can inform long-term strategic planning for a business.

15. Can you describe target costing and its role in driving down product costs?


Target costing is a cost management strategy that aims to reduce the overall costs of a product through setting a target cost at which a product must be produced in order to generate a desired profit margin. This approach involves determining the acceptable price for a product based on market demand, and then working backwards to determine the maximum allowable cost of production.

The target cost is calculated by subtracting the desired profit margin from the expected selling price. If the estimated production costs are higher than the target cost, strategies must be implemented to reduce costs and reach the target.

Target costing drives down product costs by promoting early collaboration between different departments, such as design, engineering, and procurement. By involving these teams in the development stage of a product, potential cost drivers can be identified and addressed before production begins.

Additionally, target costing promotes value analysis techniques where products are analyzed for their essential functions and unnecessary features or complexity is eliminated. This results in a more streamlined and cost-effective product design.

Furthermore, target costing encourages continuous improvement efforts during production to meet or beat the agreed-upon target cost. As a result, this approach helps drive down product costs while maintaining or improving quality standards.

16. How does value chain analysis play a part in determining product costs through cost reduction initiatives?


Value chain analysis is a tool used to assess a company’s entire process of creating, designing, producing, marketing and delivering a product or service. It involves identifying all the activities involved in creating and delivering the product, and analyzing how these activities add value to the end product. Through this analysis, it becomes easier to identify areas where costs can be reduced without compromising on the quality of the product.

Cost reduction initiatives involve identifying ways to cut costs and operate more efficiently without sacrificing quality. Value chain analysis helps in determining product costs through cost reduction initiatives by breaking down the cost of each activity involved in creating and delivering the product. This allows companies to identify which areas are costing them the most and where they can make changes to reduce those costs.

For example, by analyzing the sourcing of raw materials for a product, a company may find that they can reduce costs by finding alternative suppliers or negotiating better deals with existing suppliers. They may also find that certain manufacturing processes can be streamlined or automated, reducing labor costs. Additionally, value chain analysis can help identify inefficient distribution channels or marketing strategies that can also be changed to reduce costs.

By identifying areas where costs can be reduced throughout the value chain, companies can effectively implement cost reduction initiatives that will ultimately lead to lower production costs and increased profitability. Furthermore, this approach ensures that any cost-cutting measures do not negatively impact the final product, allowing companies to maintain their competitive edge in the market while also reducing expenses.

17. What are some common challenges or limitations companies face when implementing a new or updated cost accounting system?


1. Cost and resource constraints: Implementing a new cost accounting system can be expensive and time-consuming, requiring significant investments in technology, software, and personnel.

2. Resistance to change: Employees may resist adopting a new system due to fear of job insecurity or lack of understanding about the benefits of the new system.

3. Lack of expertise: Companies may lack the necessary internal expertise to design, implement, and maintain the new system.

4. Data accuracy and integrity: The success of a cost accounting system relies heavily on accurate and reliable data. If the data input is incorrect or incomplete, it can lead to inaccurate calculation of costs and decision-making.

5. Compatibility issues: The new cost accounting system may not be compatible with existing systems or processes, making integration and synchronization difficult.

6. Time-consuming implementation process: It may take months or even years for a company to fully implement a new cost accounting system, causing disruptions in operations and delayed results.

7. Employee training: Training employees on how to use the new system can be time-consuming and costly, especially if it involves large numbers of employees who perform various roles within the organization.

8. Resistance from middle management: Middle managers who are directly involved in daily operations may feel threatened by the implementation of a new cost accounting system as it could change their roles or responsibilities.

9. Difficulty in making changes to existing processes: Companies that have been using traditional cost accounting methods for a long time may find it challenging to make fundamental changes to their processes and procedures required by the new system.

10. Lack of support from top management: If top management is not fully committed to implementing the new cost accounting system, it can hinder its success as they hold the power to provide necessary resources and support for its implementation.

18. Can you explain the concept of relevant costs and their importance in decision-making processes?


Relevant costs refer to any cost that will change or differ depending on the decision being made. In other words, relevant costs are future costs that are affected by a decision and have the potential to influence that decision.

These costs are important in decision-making processes because they help managers and businesses make informed choices about which alternatives to pursue. By identifying and considering only the relevant costs, managers can eliminate unnecessary information and focus on the factors that truly matter in making a decision. This can lead to better decisions, reduced expenses, improved efficiency, and ultimately increased profits.

One key aspect of relevant costs is their ability to be compared. By comparing the relevant costs associated with each option, managers can determine which choice offers the most value or has the lowest cost for what they want to achieve. This allows them to prioritize their decisions based on financial impact and helps them select the best course of action for their specific goals.

Furthermore, considering only relevant costs promotes forward-looking decision-making. It encourages managers to think about future consequences rather than relying on past or sunk costs that cannot be changed. This helps avoid making decisions based on emotional attachments or personal biases.

Overall, the concept of relevant costs plays a significant role in guiding informed and rational decision-making processes by focusing attention on pertinent information while filtering out irrelevant details.

19.Do international companies follow the same principles of cost accounting as domestic companies?


Generally speaking, yes, international companies follow the same principles of cost accounting as domestic companies. In both cases, cost accounting involves the process of recording, analyzing and reporting on the costs incurred by a company to produce goods or services. This includes collecting and categorizing costs, calculating unit costs, analyzing variances between actual and budgeted costs, and using this information to make decisions about pricing, production processes, and resource allocation.

However, there may be some differences in practices and guidelines between different countries that could impact how cost accounting is implemented. For example, there may be variations in tax laws or international trade regulations that could affect how costs are calculated and allocated. Additionally, cultural factors may also play a role in how companies approach cost accounting. Ultimately, the specific principles and practices used will depend on the individual company’s financial system and any applicable regulations or standards in their respective country.

20.What potential ethical issues may arise within a company’s use of cost accounting techniques, if any?


1. Manipulation of Data: One potential ethical issue is the manipulation of data to reflect a desired outcome. This can happen when managers or employees are incentivized to meet certain cost targets, leading them to artificially inflate or deflate costs.

2. Misrepresentation of Financial Performance: Cost accounting techniques may also be used to misrepresent the financial performance of a company. This can include hiding certain costs or expenses or inflating revenues in order to present a more favorable picture to stakeholders.

3. Lack of Transparency: If cost accounting techniques are not fully explained and understood by all stakeholders, it can create a lack of transparency and trust within the company. This can lead to suspicion and mistrust among employees, investors, and customers.

4. Conflict of Interest: In some cases, there may be a conflict of interest between management and shareholders in using certain cost accounting techniques. For example, if management’s compensation is tied to meeting cost reduction targets, they may prioritize their own interests over those of the shareholders.

5. Unfair Competition: Companies that use cost accounting techniques to reduce their production costs may gain an unfair advantage over competitors who do not have access to the same resources or technology.

6. Pressure on Employees: Management’s focus on reducing costs through cost accounting techniques may put pressure on employees to cut corners or compromise on quality in order to meet targets. This can lead to unethical behavior and harm the company’s reputation in the long run.

7. Impact on Employees’ Compensation: The implementation of cost accounting techniques such as activity-based costing (ABC) may result in changes in how employee performance is evaluated and compensated, which could potentially create conflicts with employees who feel their interests are not being fairly represented.

8. Ethical Standards for Overhead Allocation: Overhead allocation is often based on arbitrary factors such as labor hours or machine hours, which can raise ethical concerns about precision and fairness.

9.Atomic Fairness Issues: Assigning costs to products or services based on arbitrary factors can result in what is known as atomic fairness, where some products or services are significantly overcharged while others are undercharged.

10. Inaccurate Costing: Ethical issues may also arise if cost accounting techniques produce inaccurate cost data that misinform decision-making processes and lead to negative consequences for the company and its stakeholders.

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