Installation Of Costing System
Having established the need for a cost department in an organization, let us find out the method of installation of a cost system. Obviously, it will depend on the objectives of costing, the nature of business and information flow system. The system will be simple, if object is simple like only price fixing. It aims at controlling cost and measuring efficiency of operations, the requirements will be different. If it is installed as per legal requirement, then it must satisfy the legal needs. The nature of the business will again indicate the degree of complexity of the system. The information flow will depend on the levels of management, who will receive information and the periodicity of reporting required. In most industries products, cost accounting record rules as prescribed by the Government are to be maintained. In such cases care must be taken so that prescribed proforma can be filled in from the cost records/books of accounts so maintained.
It is evident that installing a good cost system is quite a challenging task. The three fundamental requirements are as follows:–
Finally, the system has to be developed keeping the following factors in view: