Objectives of Cost Accounting
1. Determining Cost: Cost accounting helps to determine the cost of producing goods or services. It identifies and measures various costs associated with production, such as direct materials, direct labour, and manufacturing overhead.
2. Fixation of Selling Price: Cost accounting allows management to understand the cost of each product. With the right data of cost included, the management can fix the correct selling price per unit of production, it will not only help the manufacturing sector but will also help the service sector to determine the price for there service offering.
3. Controlling Costs: One of the main objective of cost accounting is that it will help management with proper data about cost in all the aspects be it material, labour or overheads. Management can analyse the data further to establish cost control by taking proper decisions in order to minimise costs and increase profits.
4. Valuation of Inventory: Cost Accounting plays an important role in valuing the most important asset for any business concern i.e. there inventory. Proper valuation of inventory allows management to determine value of there stocks for the purpose of financial accounting. Cost accounting uses several methods of inventory valuation like FIFO, LIFO, etc.
5. Comparison of Performance: Cost Accounting compares actual performance with the pre set standards and targets, in case any deviation arises such variances are reported to management for proper action to be taken against adverse result or outputs. Either the reason of variance is identified and corrected for future, or standards are re-checked if they stand correct for the business process.