Theoretical Concepts in Cost Accounting

Cost accounting is a method used by businesses to track, analyze, and control costs associated with production or operations. It helps companies understand where money is spent, which can inform budgeting and pricing strategies. Key concepts include fixed costs (unchanging expenses like rent), variable costs (expenses that fluctuate with production levels), and direct costs (expenses directly tied to a product, like raw materials). By analyzing these costs, businesses can improve efficiency, enhance profitability, and make informed financial decisions. Ultimately, cost accounting supports a company’s overall financial health and strategic planning.