Cost accounting systems used by manufacturing companies are based on the?

1. History of business unit: The history of a business unit implies the duration of its existence, position in the industry, the rate of growth, policy and philosophy of management and the like. The history of business unit serves as the basis for designing the cost accounts in respect of necessity, simplicity, and investment involved in installing cost accounts.

2. Nature of the industry: The nature of business such as manufacturing, mining, trading, etc. determines the costing techniques to be applied. Similarly, the type of product manufactured also determines the method of costing that is to be employed. In other Words, there is no all-purpose technique and method of costing that can be applied universally.

3. Product range: The range of products manufactured and sold also determines the method of costing to be selected. Accordingly range of products must be analyzed in terms of size, models, fashions, area of market, competitors and whether the products are made to customers' specification or for stocking and selling.

4. Technical considerations: Technical considerations that influence the installation of cost accounts are as follows:

(a) Size and layout of the factory

(b) The existence of production and service departments

(c) Flow of production

(d) Capacity of machines and degree of mechanization

(e) Existence of laboratories

(f) Internal transport and material handling equipments

(g) Production control techniques

(h) Inspection and testing of materials and finished goods.