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Costing methods Importance
27th September 2022
- 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.
- Help to understand the value of inputs and outputs in production process.
- Helps the management to find the actual cost per unit of each product.
- It helps to find out cost at various stages of its production.
- It reveals the profit and loss of each activity.
- Helps the management to take decisions.
- Comparison of performance is possible.
- It contributes to the building up of good organizational structure
- Efficient communication system.
- Avoidance of wastage.
- Data are useful to the government.
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