The main objectives of cost accounting can be described as follows:
1. Determination of costs
This is the main cost accounting goal to track and analyze the unit cost of the product made by the company. It helps to determine the cost of each activity like process, operation, job, etc.
2. Set the selling price
Cost accounting provides the basis for determining the selling price of the company's product by finding the cost of each product. It helps management to set the selling price of products and services.
3. Cost control
Cost accounting helps the organization control production costs by taking the necessary steps to reduce waste of materials, time, and costs while performing the operation.
4. Support in decision making
Cost accounting helps management to make decisions such as make-or-buy decisions, drop or continue decisions, future expansion policy, etc. It helps to make a choice between two or more options for action.
5. Determination of profits
Cost accounting helps track and determine the profitability of the product by periodically preparing the income statement and balance sheet.
6. Formulate guidelines
Cost accounting plays an important role in formulating organizational guidelines. It provides the top-level management with the necessary information and data that are essential for shaping the company's marketing policy.
7. Basis of the annual financial statements
The cost accounting is the basis for the preparation of various annual financial statements (profit and loss account, balance sheet, trial balance sheet, etc.) of the company.