Effectual cost accounting is a process that improves the efficiency of a company. Additionally, it is a process of analyzing, recording, and reporting all the costs of production of a product in a company. Resultantly, this enables the company to make better financial decisions and budget accurately. It involves the ascertainment of costs of every order, contract, service, process, unit, or job. Moreover, it aims to improve the net profit margins of a company. Furthermore, it assesses the variable and fixed costs in every step of production. The
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THE MAIN OBJECTIVES OF EFFECTUAL COST ACCOUNTING
Effectual cost accounting helps to ascertain the cost per unit of the different products that a company manufactures. Also, it provides a correct analysis of cost by operations or process which helps in making better financial decisions. Moreover, it discloses the sources of wastage and involves the preparation of reports which are necessary to control wastage. Additionally, it involves examinations of the processes which helps to improve the efficiency of a company. Cost accounting also provides requisite data and serves as a guide for setting prices of products that a company manufactures of the services that it renders. Furthermore, it ascertains the profitability of each product or service and advises management on how to maximize these profits.
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METHODS OF IMPROVING THE EFFICIENCY OF A COMPANY
Essentially, to improve the efficiency of a company, it is important to set achievable goals and objectives. The goals should be clear and realistic. It is a way of providing motivation and a target for members of the company to work towards. Additionally, it is important to carry out processes such as effectual cost accounting and performance management to ensure that the company operates efficiently on available resources. Moreover, it important to communicate clearly throughout the company. Open communication helps to save time, improve productivity, and enables the company to make better financial decisions.
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