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Cost Estimating Versus Cost Accounting

Posted by Dave Ferguson on Oct 26, 2010 9:29:43 PM

What is the difference between cost estimating and cost accounting?

Cost estimating is a precursor to cost accounting because it done at the beginning of the process.   Lets define cost estimating as the estimation of the cost of a goods or services  prior to the actual production of the goods or services.  Cost estimating is used in both the production of goods and services to perform a specified action.

Cost accounting or costing is different then cost estimating because its an analysis of the costs to actually product the goods or services.  Cost accounting is done after the production while the cost estimating is done prior to the costing of the goods and services.

I like to think of  cost estimating as being an educated guess.  Unless there are simulations which can be run to determine the exact cost estimate, the estimator is performing a best guess based on previous knowledge.  Cost estimating is a prediction while cost accounting is actually what expenses where where incurred during the production process.

Cost estimating is a complex process and requires a person who understands the domain in which the cost estimating is taking place.  Some of the items that are considered

Product Design

Materials and how they are used in the product or services

Operational steps required to produce the product or services

Machine and Labor costs involved

Visually be able to understand all the areas of manufacturing from the requirements

MIE QuoteIt from MIE Solutions offers free quoting software for step by step quoting.  The quoting software is very user friendly and offers customization of operations, materials, formulas and even table lookups.   Please visit our website and take a tour of the free quoting software instead of the old method of quoting in excel.

Topics: company, cost accounting, cost estimating, cost estimating software, costing, erp, Estimating, free, job cost estimating software, job shop, labor estimating, mie solutions, mie trak, pricing, quoteit, quoting, shop rate calculation, software

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