To become a cost accountant, it's important to specialize in a field that offers strong career growth, such as cost accounting. Cost accountants help businesses manage expenses, optimize pricing strategies, and enhance profitability. This critical role requires a solid understanding of accounting principles, specialized training, and certifications. Explore the necessary steps to pursue a cost accounting career, including the educational requirements, key skills, and potential career paths. Learn about the qualifications needed to succeed in this high-demand field and the opportunities for advancement that cost accountants can expect.
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What is Cost Accounting?
If you enjoy analyzing financial data and optimizing expenses, a career as a cost accountant could be a great fit. Businesses, government agencies, and organizations rely on cost accountants to improve cost control, enhance efficiency, and maximize profitability. Also known as managerial or management accountants, these professionals play a key role in budgeting, forecasting, and financial decision-making. Explore the education requirements, certifications, and career paths needed to succeed in cost accounting.
Cost accountants specialize in internal financial processes to help businesses improve efficiency and profitability. Unlike general finance accounting managers who prepare reports for investors, cost accountants focus on budgeting, risk management, forecasting, and performance analysis. In senior roles, they may oversee junior accountants while providing management with detailed financial reports and statements for strategic decision-making. Learn the key steps, education, and certifications needed to build a successful career in cost accounting.
Areas of Specialty
A cost accountant’s role is often tailored to an industry’s needs but generally falls into three main areas. First, they maintain cost data on a company’s products, continuously reviewing standards and analyzing supply costs. They may recommend vendor changes, evaluate expenses across the supply chain, and conduct cost-benefit analyses. Cost accountants also advise on production adjustments based on sales trends and help determine sales targets needed for profitability. Their expertise is crucial when developing new products or services.
Cost accountants also review overhead, labor costs, and rates of depreciation, recommending changes to improve the bottom line and reduce waste. They may evaluate potential business prospects, including expansion or the purchase of another company. Every business seeks to drive profitability and the cost accountant is an essential part of the process. In this position, you'll have info on where the numbers are and where a company needs them to eventually be.
While cost accountants are employed in many industries and have excellent career prospects, especially when they step into a managerial accounting position, they are especially prevalent in construction and manufacturing. These are industries dealing with large amounts of inventory and considerable labor and production costs and can easily utilize your accounting skills to enhance profitability assurance.
Where You Can Work?
The majority of cost accountants work either in government agencies or are employed by large companies. Some cost accountants may establish private consulting ventures or work for a public accounting firm. Those working in an independent practice are generally hired to consult with smaller firms that cannot afford to employ a full-time cost accountant. These private cost accountants may help a company establish a price for its products while establishing the inventory’s value as it is subject to market forces.
When it comes to where a cost accountant literally works, this is a white-collar job primarily conducted in an office setting. However, cost accountants may have to travel to a company or supplier’s production facilities to keep tabs on inventory and production operations. If there are inventory discrepancies, it is the cost accountant’s role to investigate the situation and reconcile them, though they are unlikely to be in a warehouse counting inventory themselves.
Cost Accounting Standards?
Average Cost Accountant Salary: $57,000
Cost accountants should familiarize themselves with the four primary methods of cost accounting.
These consist of:
| Entry Level | Mid Career | Late Career |
|---|---|---|
| $50,000 | $61,300 | $65,500 |
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Standard costing system
The most common and simplest method of cost accounting, this system gives an average cost to every direct cost associated with production of a product, such as labor, overhead, and materials. The system then becomes standardized. A cost accountant in a management position may have a staff accountant use an accounting information program to track these costs, whereas those who work as consultants will likely have the information technology knowhow and analytical skills to do this themselves.
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Cost volume profit analysis
This method determines all fixed and variable costs for the entire process of producing all products. It is a straightforward way to figure the company’s breakeven point, or at what point the current production level starts turning a profit.
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Activity-based costing
This method determines the fixed and variable costs in a product line as proportionate to its direct costs. Overhead from each department is analyzed, including employee time management. It’s a good tool for showing management how money and time is spent and may be used by high level management professionals, such as a chief cost accountant (CCA).
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Throughput accounting
This method keeps the focus on organization efficiency expansion, such as production bottleneck reduction, with the goal of maximizing throughput, or the amount of material passing through the system.
Software Familiarity, Technical and Other Skills
Cost accountants must possess a deep familiarity with cost accounting software programs and good technical skills. It is also crucial, as with other accounting positions, to stay on top of software package changes and trends in the industry, so they are always operating as effectively as possible. Because cost accounting is data-driven, cost accountants will spend a great deal of time on their computers, performing data entry and conducting data analysis. Along with technical skills, cost accountants require good communication skills and writing ability, as they must break down complicated information in a way that is easily grasped by management. Because so many facets of a cost accountant’s job are deadline-oriented, the job requires strong time management skills, attention to detail, and discipline, and one of the most important qualities of all is strong analytical skills. Those with all these skills will have no lack of career opportunities and career development, with or without licensure and extensive work experience.
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What is the Required Education?
Cost accountants must receive at least a bachelor's degree in accounting or a closely related field. While not a requirement for the job, many cost accountants become certified management accountants. Some employers may seek cost accountants with a master’s degree in either accounting or an MBA (master of business administration) from a business school. While a cost accountant does not need a certified public accountant (CPA) designation, many employers prefer to hire someone who is a member of the AICPA, especially when working in a large organization.
What are the Certifications?
A cost accountant should hold a license in the state in which they find employment. While cost accountants do not have to become a certified management accountant (CMA), it is a wise move for their chosen career path. This exam falls under the auspices of the Institute for Management Accountants and focuses on management. While rigorous, the exam is only about half as long as the Uniform CPA exam, and is complete in four hours. A passing score of at least 60% is required.
To become a CMA, an individual must have a bachelor’s degree, and there are other specific subject education requirements you must complete as a student. The candidate must also have at least two years’ of work experience in accounting prior to applying for certification. To obtain certification, candidates must join and remain a member in good standing with the Institute of Certified Cost Accountants (ICCA). Such memberships require a minimum of a bachelor’s degree.
Once a cost accountant receives certification, he or she must maintain certification by taking continuing education courses each year. Total requirements are a minimum of 60 hours of continuing education every three years, or approximately 20 hours per year. The certified cost accountant must remain a member in good standing of the ICCA.
Advancement
Cost accountants are often entry-level positions for accounting management. With professional experience and education, cost accountants may advance to becoming budget directors, internal auditing managers, accounting managers, and eventually controllers, treasurers, or chief financial officers (CFOs). It's not unusual for someone who began in cost accounting to become a corporate president, though you may need to earn a graduate degree in an accounting program to be considered for advanced accounting positions.
Salary and Job Outlook
According to the US Bureau of Labor Statistics (BLS), the median annual wage for accountants and auditors was $79,880 in May 2023. The lowest 10% earned less than $50,440, while the highest 10% earned more than $137,280. Employment in this field is projected to grow by 7% from 2023 to 2033, indicating a steady demand for accounting professionals. Given that companies continually seek to enhance product profitability, the need for cost accountants is expected to remain strong.
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