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Cost Structure of a Shipping Company


This chapter is concerned with the concepts and theory that underlie the operating cost structure in ocean shipping companies. The concepts and theories considered in this chapter apply to both the classification of operating costs and to those factors which may be reasonably expected to affect the level of such costs.

Accounting for Operating Costs in Ocean Shipping Companies

The cost structure within a firm is typically a function of the cost accounting process. Cost accounting generally is a part of managerial accounting.1 Where financial accounting is concerned with recording actual financial transactions, managerial accounting is concerned with the discovery of relationships in financial data which enhance managerial decisionmaking.2

Eight factors and characteristics differentiate traditional managerial accounting from financial accounting. These factors and characteristics are as follows.3

1. Managerial accounting focuses on providing data for the internal use of an organizations managers, while financial accounting focuses on providing data for external uses by investors and creditors.

1R. H. Garrison, Managerial Accounting, 5th ed. (Dallas: Business Publications, Inc., 1991), 11.

2. Managerial accounting emphasizes the future, while financial accounting emphasizes the current period and the past.

3. Financial accounting is governed by generally accepted accounting procedures, while managerial accounting is not so governed.

4. Managerial accounting emphasizes the relevance and flexibility of financial data, while financial accounting requires adherence to factual events; thus financial accounting reports may not deviate from actual events, regardless of intent. ...

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