Written by:Diomer Antonio Galán Rincón.
Bachelor's Degree.Public Accounting / MSc.Science of Higher Education.
Autor: @dgalan, a través de la herramienta Power Point 2010, y utilizando una imagen de dominio público bbc.com/news/science
Nowadays companies must adapt to the existing competition in the market, since every day this is greater and has as a consequence the appropriate decision making to remain in competition, this involves studying the cost structure of the entity in order to detect failures or weaknesses for improvement and thus achieve lower costs.
Because of this, costs are a fundamental basis for decision making within any entity, so a proper management of these will lead us to be more efficient and achieve the goals set successfully, for all management it is important to know the costs in two stages of their work; when making decisions and when implementing the decisions taken.
In most cases, the study of costs is not given the proper importance within organizations and therefore these organizations tend to be frustrated by the decrease of their profits and making wrong decisions.
Therefore, decision making within a company goes hand in hand with cost accounting, as mentioned by Bastardo and Ramos (2015) who say that "modern cost accounting is based on the perspective that the collection of cost information is a function of the management decisions taken.
Because of this, managers of organizations must understand a series of steps to achieve proper decision making, first they have to identify the problem or uncertainty presented by the entity, obtain the actual information of the company, make forecasts for the future, make decisions by choosing alternatives and finally implement the decision, evaluate performance and learn from what happened.
Ignorance of this accounting matter has as a consequence the inadequate management of financial resources within the entities, this leads to ignore the indebtedness capacity of the company, to take higher financial risks than appropriate, and therefore, tend to decrease their level of competition in the market, since they can have higher prices than the competition and therefore decrease sales and profits received during a given period.
Due to the above, there is no doubt of the importance for a company or organization to establish an adequate cost structure, since this can offer many favorable qualities, such as knowing price value errors, as well as making adjustments in some of its processes, administrative, financial and economically with the sole purpose of being the expected profitability when determining the real value of the good.
It should also be noted that ignorance of the realization and implementation of an adequate cost structure can generate a reduction in the performance of the entity and are more vulnerable to failure in terms of making effective and accurate decisions and achieving the goals set.
I hope you like my article and I would appreciate all your comments.
bibliography consulted:
1.- Bastardo and ramos (2015) Design of a process costing system for the company pegapiso, C.A. in morichal largo Monagas.