An example of cost accounting in real life which is the one that tracks the cost of the producing vehicle by a car manufacturing company. Materials (steel, tires), labor (assembly line workers), and overhead (machine maintenance, electricity) are the direct materials, direct labor, and factory overhead of the company respectively. This allows the company to analyze these costs and come up with the total cost per car and adjust pricing, production methods and suppliers to ensure profitable business. Having this detailed tracking, managers can determine if the use of automation is needed, if materials should be switched or if processes should be reworked—cost accounting is a vital business tool to deal with on a day by day basis.


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