Costing methods Importance

27/09/2022 0 By indiafreenotes
  • Controlling costs: Cost accounting helps the management foresee the cost price and selling price of a product or a service, which helps them, formulate business policies. With cost value as a reference, the management can come up with techniques to control costs with an aim to achieve maximum profitability.
  • Showing profitable and non-profitable activities: This information helps the management put an end to non-profitable activities while developing and expanding the profitable ones.
  • Determining the total per-unit cost: Cost accounting techniques help in determining the total per-unit cost of a product or a service, so that the business can fix the selling price for it.
  • Comparing costs over time: The data in the cost sheets prepared for various time periods helps in comparing the cost for the same product or a service over a period of time.
  1. Help to understand the value of inputs and outputs in production process.
  2. Helps the management to find the actual cost per unit of each product.
  3. It helps to find out cost at various stages of its production.
  4. It reveals the profit and loss of each activity.
  5. Helps the management to take decisions.
  6. Comparison of performance is possible.
  7. It contributes to the building up of good organizational structure
  8. Efficient communication system.
  9. Avoidance of wastage.
  10. Data are useful to the government.