Cost accounting is the process of recording, classifying, analyzing, and summarizing in monetary terms the resources consumed or expended in production, so management can determine how healthy objectives are being met. As a result of this important function, many companies have increased their focus on cost accountants.
When most people think of accounting careers, the first thing that comes to mind is public accounting. However, there are many other accounting career paths to consider. One such path is cost accounting. Cost accountants play a critical role in helping organizations control costs and improve profits. If you’re interested in pursuing a career in cost accounting, here’s what you need to know.
1. What Is Cost Accounting?
Cost accounting is a method of recording, classifying, and summarizing in monetary terms the various business expenses incurred by a company. It helps management analyze financial statements to assist decision-making. Cost accounting is an important part of financial management, the function within an organization that plans its finances and activities over a period of time to accomplish its goals. Cost accountants use cost models, called cost accounting systems, to collect, analyze or estimate various types of business activity.
They produce monthly progress reports on budgeted vs. actual costs for projects and occasionally produce a final report showing actual costs expended vs. total budgeted for project completion. They use various manual processes to ensure data accuracy, but oftentimes these processes are inadequate due to the lack of efficient tools that automate many manual tasks.
2. What Does a Cost Accountant Do?
Cost accountants prepare, analyze and interpret cost reports for management to help them make business decisions. They often work closely with other members of the financial team, like general ledger accountants (who record transactions) and auditors (who verify information).
A cost accountant’s daily tasks include:
Managing the Cost Accounting System
Cost accountants are responsible for managing the cost accounting system, which is used to collect and summarize activity data. They also ensure the information in these systems is accurate and up-to-date.
Calculating Costs by Determining Actual or Standard Costs
Cost accountants use various principles to determine an asset’s actual cost, which is the price paid to buy or construct it. Their goal is to find out how much a company has spent on an asset in order to figure out depreciation and amortization costs.
They also calculate standard costs by using previous performance information from a group of similar assets, adjusting for changes that have occurred over time. Managers use these standard costs to compare current performance against expected levels.
Determining Budgeted Costs for Projects
Before any new project begins, managers determine the estimated cost of the project. Then, once actual costs are determined for each phase of the project, they summarize that data into an end-of-project report showing where they exceeded or fell short of project estimates.
Preparing Pricing and Cost Allocation Reports
Different departments within a company may have different ways of allocating overhead costs to products or services. Cost accountants use predetermined overhead rates to allocate indirect costs, such as quality control and accounting expenses, to other departments throughout the organization. They prepare monthly financial statements that summarize resource consumption for each department.
Filing Cost Reports With Government Agencies
Companies are required to complete various forms for local, state, and federal governments when they incur certain types of expenses. Cost accountants review these reports and examine them for accuracy before submitting them to the appropriate authorities.
3. What Skills and Qualities Do You Need to Be a Cost Accountant?
Some of the skills and qualities do you need to be a cost accountant include:
Attention to detail- unlike many financial professionals, cost accountants, don’t usually handle money. They spend their time analyzing information from accounting systems and other sources. This meticulous work requires attention to detail.
Prioritization- cost accountants deal with a lot of complexity. They must prioritize daily tasks to ensure they can meet deadlines and stay on track with the company’s overall goals.
Multi-tasking- most of the tasks cost accountants perform must be completed within strict deadlines, so they often need to manage multiple projects at once.
Organizational skills- cost accountants organize their time and resources carefully because they work closely with other departments, such as accounting or information technology (IT). This means that they must understand how each department operates and factor that into their overall strategy.
Verbal communication skills- like all finance professionals cost accountants typically interact with people at all levels within an organization. They must be able to explain complex topics in a way that’s easy for everyone to understand.
Problem-solving skills- cost accountants face daily challenges that require creative solutions, such as unexpected changes to client needs or incomplete information.
Mathematical skills- cost accountants use mathematics to perform calculations and make informed decisions. They often work with numbers in spreadsheets and other financial management tools.
Computer literate- most cost accountants use some type of computer program to prepare reports and communicate with other teams.
Ability to work in a team in addition to working closely with accounting professionals, cost accountants also interact with project managers, IT specialists, and other employees throughout the organization. This means that they must be able to maintain strong teamwork skills.
4. What Does a Cost Accountant Earn?
The average salary for a cost accountant is $60,974 per year. Professionals with four-year degrees in accounting may start out earning slightly more than those with only a two-year degree, but that gap narrows as accountants gain experience.
According to the US Bureau of Labor Statistics (BLS), the median annual salary for cost accountants is $60,974. The bottom 10% of earners make less than $35,788, while top earners earn more than $102,278.
Accountants’ salaries vary by industry; the BLS reports that accountants employed by state governments make an average of $61,960 per year, while those working for local governments earn an average of $59,020 yearly. Cost accountants working for colleges and universities tend to see some of the highest salaries in the profession, earning an average of $67,110 per year. Those employed by architectural, engineering, and related services firms earn the most on average at $78,910 yearly.
5. What Are the Education Requirements of a Cost Accountant?
A bachelor’s degree is the standard minimum education requirement for a career as a cost accountant. Common degrees include a Bachelor of Science in Accounting, a Bachelor of Commerce, and a Bachelor of Business Administration with an Accounting concentration. Some cost accountants continue their education through graduate school to earn Master of Professional Accountancy (MPAc) or other advanced accounting degrees, such as a Master of Science in Accounting.
Most jobs in this field require at least a bachelor‘s degree, with many employers seeking candidates who have earned an MPA or MBA. The BLS stated that most entry-level accountants need to have completed some undergraduate education courses, but the amount of coursework required for this job varies depending on employer needs and candidate experience.
6. What Are the Experience Requirements of a Cost Accountant?
An internship or relevant work experience is a plus but not a requirement. The BLS stated that most entry-level accountants need to have completed some undergraduate education courses, but the amount of coursework required for this job varies depending on employer needs and candidate experience.
While many accountants start out in their careers with an internships, most gain the necessary experience on the job. The required amount of work experience may vary depending upon the employer and level of responsibility at which you aim.
7. What Does a Typical Day Look Like for a Cost Accountant?
A cost accountant is always scanning for ways to improve client processes, so they spend much of their time analyzing numbers and evaluating information. They also use mathematics skills on the job every day, even when performing basic duties such as making copies or faxing documents.
Some cost accountants start their day by reading internal emails about new accounting procedures and reports to be completed. They then examine company records to determine where revisions are needed or discuss the needs of internal clients with other staff members. Accountants focus on budgets, and budgets are an important part of cost accountants’ job descriptions.
A few hours each day are usually dedicated to entering data into the company’s accounting system using a computer program. An accountant may also be responsible for answering phone calls and responding to client requests.
Depending on the specific requirements of a company or industry, cost accountants may perform a variety of additional tasks throughout the day. For example, a business with a lot of international clients may require employees to use language skills when corresponding with foreign businesses and individuals. Cost accountants also resolve clients’ problems by clarifying complicated accounting issues and providing recommendations for more efficient business practices.
8. What Is the Job Outlook for a Cost Accountant?
The BLS predicts a 10% increase in jobs for accountants and auditors from 2016-to 2026, which is faster than the average job growth rate.
According to the BLS, accountants and auditors are needed by a variety of organizations, including businesses, government agencies, and nonprofit entities. Demand will likely grow as the economy and business environment become more complex and regulations increase.
The BLS also stated that the employment of accountants and auditors is expected to grow 10% from 2016-to 2026, about as fast as the average for all occupations. Accounting careers generally offer stability and long-term prospects because entry-level positions often lead to upper management or supervisory positions.
9. Do Cost Accountants Work in Teams or Independently?
Cost accountants typically work in teams on larger projects. They may be part of an industry-specific team, such as one for an energy company, performing research and analysis to help the company develop better outcomes for some aspect of its operations. Other times, a cost accounting team is specific to a particular client or project. For example, a single firm may hire an accountant who specializes in bankruptcy proceedings to help plan for the financial future of a business going through bankruptcy.
Many of the tasks performed by cost accountants involve working with large groups of people on a daily basis, so it is important that you are comfortable interacting with others in a professional setting.
10. What Kinds of Companies Do Cost Accountants Work for?
Cost accountants work in a variety of types of organizations for a wide range of purposes. They may be employed by private companies, government agencies, or nonprofit groups. Cost accountants can find jobs in all sectors, from manufacturing and retail to healthcare and hospitality.
Some of the top recruiting companies for a cost accountant include:
PepsiCo- The largest food and beverage company in the world, is always looking for experienced cost accountants.
Cigna- With a focus on health and wellness, Cigna employs cost accountants to help develop efficient business practices.
FedEx- The global courier delivery service needs cost accountants to help plan for changes that affect the company’s financials.
Kroger- This grocery store chain employs cost accountants to plan for the company’s financial future.
11. What Are the Best Colleges to Study Cost Accountancy?
Purdue University- West Lafayette, IN, offers both an undergraduate and graduate degree in accounting.
The University of Illinois at Urbana– Champaign-Both, the College of Business, and the School of Accountancy offer excellent programs for students looking to become cost accountants.
The University of Texas at Austin- Offering two accounting degrees, students can enroll in undergraduate and graduate courses at the McCombs School of Business.
University of North Carolina- Chapel Hill-The accounting program at UNC is known for its research opportunities, and it has a strong alumni network that works in finance and other industries.
Kansas State University- Manhattan, KS-SASA offers a well-respected Bachelor of Science in Accounting, and its alumni work in a variety of industries, from accounting to management consulting.
The University of Minnesota- Minneapolis, MN-The Carlson School of Management, offers an undergrad (MBA) may see salary increases of degree that is highly sought after by many employers.
University of Phoenix- Online programs offer students the opportunity to earn an advanced degree without leaving their jobs.
12. Online Courses to Study Cost Accountancy
Cost Accounting –
A Comprehensive Study for CA/CMA/CS /ACCA/ by Udemy- Udemy offers online classes taught by industry professionals and experts to help students develop skills in a particular field.
Cost Accounting by Udemy-
This course covers the fundamental concepts of accounting for manufacturing, service, and not-for-profit organizations. This course is designed to give students a general understanding of cost accounting principles in order to be successful when entering the workforce.
Cost Accounting Specialization by Outercourse
cost accounting specialization consists of four courses that include three required classes and one elective course. This course teaches students the “how-to” of cost management, including how to measure costs, analyze capacity utilization, perform activity-based costing, make strategic acquisitions, and more.
Introduction to Cost Accounting by Coursera-
This course is designed for those who want to understand the concepts of cost accounting and how it is used as a management tool. Understand costing systems, cost-volume-profit relationships, activity-based costing, and more with this introductory cost accounting course.
Diploma in Cost Accounting by Alison
Online diploma courses can help students build their career skills and knowledge. With an emphasis on problem-solving, this course covers material such as uncertainty in costing and measuring product costs for decision making.
The cost accounting career path is a great choice for those who want to work in an economic and analytical field. Cost accountants have the opportunity to learn about finance, budgeting, forecasting, sourcing, purchasing management, and much more while also specializing in specific areas such as healthcare or manufacturing. The best way to get started on this pathway is by earning your Bachelor’s degree from a reputable institution like Eastern Michigan University before applying for entry-level positions with companies that could provide you with training opportunities. Through these types of internships or apprenticeships, you can hone your skills until they are razor sharp!