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Definition

The recording and analysis of a company's costs in such a way as to improve its profitability. Cost accounting is distinguished from financial accounting. Financial accounting simply records what happened in a company during the financial period. Cost accounting seeks to establish exactly how much each of the company's products costs to produce and how profitable they are individually. This helps management make key decisions about which products to focus on and exactly where their various products are in their life cycle. It helps them determine the best way to design and manufacture a product as well as its packaging and marketing.

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