The main uses of the cost accounting are stated below
1. Helps in the ascertainment of costs
According to Ana, a senior consultant at Myassignmenthelp, “Costs accounting assist in the calculation if the cost of each product, process, job, contract activity and so on by using various methods of costing like job costing and process costing”.
2. Helps in control of costs
Helps in the control of material costs, labour costs and overheads by using various techniques of control like the costing and budgetary control.
3. Helps in making decisions
It gives guidelines to the management in taking various decisions like
- Whether to make or buy a component
- Whether to retain or replace an existing machine
- Whether to process further or not
- To take decisions regarding the shut down or continue operations.
- Whether to accept orders below costs or not
- Whether to take a decision regarding expansion
How much deduction in the selling price should be made in case of depression?
It helps in fixing the selling price of products or services by providing detailed cost information.
i. Cost accounting helps in the inventory control
The cost accounting system helps in management of the inventory by using various techniques like the ABC analysis, economic order quantity, stock levels, perpetual inventory system and continuous stock taking, inventory turnover ratio.
ii. Cost reduction
Cost accounting also helps in the management of the costing of the company and thereby it helps to reduce the extra costs incurred by the organisation. it also helps to find out options for the organisation using which the organisation will be able to reduce the cost of production.
iii. Helps in measurement of efficiency
It helps in reviewing the unprofitable activities and help the management to take decisions based on that and reduce the unproductive areas of the organisation.
iv. Helps in identifying material losses
The identification of material losses is very essential from the view point of the organisation, the cost accounting system helps the management to identify the material losses like the wastage, scrap, spoilage and defective through report on material losses so that necessary corrective measures can be taken. The management of waste material is very essential for any organisation and the cost accounting system by helping the organisation in doing so play an effective role in decision making.
v. Helps in detecting idle time and labour turnover
It helps in finding out the idle time spend by the labours and also calculation of labour turnover through the report on idle time and labour turnover so that the necessary corrective action may be taken. the calculation of the labour turnover helps the management to take decisions regarding the labour policies and to take decisions whether to hire more labours or to reduce the number of labours from the organisation. it also indicates the efficiency of the labours.
vi. Helps in identifying idle capacity
It helps in detecting the idle capacity so that necessary corrective measures can be taken regarding increasing the efficiency of the organisation and to increase the productivity. The organisation can also help to take decisions regarding taking some initiative that will help to eradicate the capacity that is idle and considered as unproductive.
vii. Helps in improving productivity
It helps in increasing productivity of materials labour and the production process can be easily enhanced by the cost accounting process. The cost accounting process helps to give information to the management regarding the most effective system of increasing the productivity by using optimum resources of the organisation.
viii. Helps in cost comparison
It also helps in cost comparison such as
a. Comparison with standard figures
Comparison of actual figures with standard budgeted figures for the same period and the same firm
b. Intra firm comparison
Comparison of actual figures of one accounting year with other accounting year within the same organisation.
c. Inter firm comparison
Comparison of actual figures of one firm with the other firm that operates within the same industry and
d. Pattern comparison
Comparison of actual figures of one firm with those of industry to which the firm belongs.
It assists in reviewing the accuracy of the financial accounts
It helps in checking the accuracy of the financial accounts with the help of the reconciliation system prepared to reconcile the profit as per the cost accounts with the profit as per the financial accounts.
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