Objectives of Cost Accounting


Objectives of Cost Accounting are as follows :

1) Ascertain Cost : To ascertain the cost of product or a services reveled and enable measurement of profit by proper valuation of inventory.

2) Analyse Costs : To analysis costs or to classify the expenses under different heads of accounts viz. material, labour, expenses etc.

3) Allocate and Apportion the Costs : To allocate or charge the direct expenses or specific costs such as Raw Material, Labour to particular product, contract or process and to distribute common expenses to each product, contract or process on a suitable basis.

4) Cost Reporting : Cost Reporting or presentation includes :

a) What to report i.e. what is the nature of information to be presented?

b) Whom to Report i.e. to whom the report is to be addressed.

c) When to Report i.e. when the report is to be presented i.e. Daily weekly monthly yearly etc.

d) How to Report i.e. in what format the report is to be presented.


5) Assist the Management : Cost Accounting assist the management in the following ways

a) Indicate to the management any inefficiencies and extent of various forms of waste of Raw Material, Time, Expenses etc.

b) Help the management in fixing of selling price.

c) Provide information to enable management to take decision of various types.


6) Cost Control : Cost Accounting assist the management in cost control. Cost control includes the following stages.

a) Setting up of targets of cast and production for each period.

b) Measuring the actual figures of performance relating to cost, production etc. for the period concerned.

c) The figures of actual performance are to be compared with the targets to find out the variation. d) Analyzing the variance, whether favorable or adverse.

e) Immediate action has to be taken in case of adverse variation.


7) Controlling Inventory : Assist the management in controlling Inventory of Raw Material, goods in process, finished goods, spares and consumables etc.

8) Optimum Product Mix : Advise the management in deciding optimum product mix merits and demerits of alterative courses of action viz. make of buy decisions, introduction or Automation mechanization, rationalization, system of production etc.

9) Future Policies : Advise management on future policies regarding Expansion, growth, capital investment, etc.







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