Cost and Management Accounting is an integral element in the preparation of an entity's financial reports. Cost accounting is made up of various branches, including; labor and process costs, absorption costs, traditional costs and activity-based costs. An efficient costing system allows managers and other users of financial reports to make decisions to improve the business by reducing and rationalizing costs to improve overall profits. How managers achieve this can be a rigorous and time-consuming task, however, if a cost system can be refined, productivity and overall cost reduction can be achieved and will result in an overall more efficient operation of the business. 'agency. This essay will critically discuss the factors a company considers in deciding a cost system to implement and manage when establishing a cost system. A cost system, by definition: “The cost system is that system in which we calculate different costs with methods and also monitor the costs to reduce waste and misuse of resources.”(SVtuition.org, 2014)A system of costing is made up of different elements that best suit the operations of a company. They have many elements that can be placed in one system and go hand in hand with each other. These methods include; labor costs, process costs, absorption costs, traditional costs, and activity-based costs are relevant and useful in today's practices because they provide a more efficient way for managers and CEOs to monitor and influence costs and cash flows of a company.Therefore, costing systems sometimes need to be specialized for various business sectors. This is because different companies operate in different ways, for example, a lump-sum approach. Journal of Corporate Accounting and Finance, 23(3), 43--51. Horngren, C., Datar, S., & Rajan, M. (2012). Cost Accounting (14th ed., pp. 324 - 331). England: Pearson.Innes J and Norris, G (1997), The use of activity-based information: a managerial perspective, CIMA.Innes J and Mitchell, F (1998), A practical guide to activity based costing, Kogan Page / CIMA.Management Accounting 6e. (n.d.). Retrieved from cambridgepub: http://www.cambridgepub.com/managerialaccounting_6e/MA_6e_CH02_Website.pdfwiseGEEK,. (2014). What are the different management accounting tools? Retrieved May 2, 2014, from http://www.wisegeek.com/what-are-the-different-management-accounting-tools.htmVitez, O. (2013). What are the advantages and disadvantages of process costing? Retrieved from Chron: http://smallbusiness.chron.com/advantages-disadvantages-process-costing-4098.html