Cost and management accounting have similar objectives. The main objective of cost is to provide the information required to perform internal management functions effectively. This objective is achieved through the achievement of the following sub-objectives:
Summary of Contents
Cost ascertainment
Cost and management accounting is aimed at tracing costs and expenses attributable to cost units or cost centres. This is known as cost ascertainment.
This, as a result, provides a basis for obtaining the cost of producing products or providing services, which intends to provide a base for fixing selling prices, hence evaluating the profitability of products produced or services provided.
Cost Analysis
cost accounting aims at identifying all components of the cost incurred in producing a product or providing services and assessing the effect of changes in these cost components on the profitability of the product and other short-term decisions
Cost Control
cost and management accounting aimed at controlling costs. Controlling costs involves putting up practical measures to ensure that costs are restricted within the prescribed or targeted limit.
Cost control proceeds from cost analysis, and therefore, if costs of goods and services are not fairly or properly ascertained and analyzed,
It would be difficult to affect the needed cost control. This could be done either by identifying sections or cost centres of the firm. cost behaviour, etc.
Cost Reduction
Reducing costs involves bringing costs down to an acceptable limit when they get out of control. Cost accounting techniques are aimed at reviewing the existing methods of production to improve upon existing efficiencies.
This may be done through value analysis (i.e., where the best way of doing a piece of work is found), which assumes that the best way of doing a piece of work is the most efficient. effective, and economical method of production.
Forecasting and Planning
Cost and management accounting is aimed at forecasting and planning the future operations of the organization. The ability to accurately predict the future operations of the firm largely depends on reliable ascertainment and analysis of present costs. A system of cost accounting helps in efficient forecasting, budgetary planning, and control.
Decision Making
Decisions are made based on reliable information. A cost accounting system aimed to provide such information on firms’ activities to enable management to make timely decisions.
Performance Management
Coe and management accounting provide a basis for assessing the performance of management by comparing actual costs to standard/budgeted costs. This intends to provide a guide to controlling cost activities and improving performance. This system of control is often referred to as budgetary control.
