What are objectives of cost accounting?

OBJECTIVES OF COST ACCOUNTING:

Cost accounting was born to fulfill the needs of manufacturing companies. It is a mechanism of accounting through which costs of goods or services are ascertained and controlled for different purposes. It helps to ascertain the true cost of every operation, through a close watch, say, cost analysis and allocation. The main objectives of cost accounting are as follows:-

• Cost Ascertainment: The main objective of cost accounting is to find out the cost of product, process, job, contract, service or any unit of production. It is done through various methods and techniques.
• Cost Control: The very basic function of cost accounting is to control costs. Comparison of actual cost with standards reveals the discrepancies (Variances). The variances reveal whether cost is within control or not. Remedial actions are suggested to control the costs which are not within control.
• Cost Reduction: Cost reduction refers to the real and permanent reduction in the unit cost of goods manufactured or services rendered without affecting the use intended. It can be done with the help of techniques called budgetary control, standard costing, material control, labour control and overheads control.
• Fixation of Selling Price: The price of any product consists of total cost and the margin required. Cost data are useful in the determination of selling price or quotations. It provides detailed information regarding various components of cost. It also provides information in
• terms of fixed cost and variable costs, so that the extent of price reduction can be decided.
• Framing business policy: Cost accounting helps management in formulating business policy and decision making. Break even analysis, cost volume profit relationships, differential costing, etc are helpful in taking decisions regarding key areas of the business.