Question - What are the advantages of Cost Accounting?
Answer -
(i) The cost accounting system provides data about profitable and unprofitable products or activities. By studying and interpreting cost data, the management can take corrective measures to improve the profitability of the concern.
(ii) Production methods may be changed or improved so that costs can be controlled to increase profits.
(iii) Cost data helps the management in minimising the loss and wastages
(iv) Cost data and information are provided to the management to determine the price of the product.
(v) Cost data can be compared with the standard costs by the introduction of standard costing. Inter-firm comparisons will enable the management to study the causes of unfavorable developments and to institute procedures for their elimination.
(vi) Inefficiencies in plant operation are very costly. The inefficiencies do occur due to wastage of materials, use of obsolete machinery and wrong man power planning. Proper use of cost accounting may remove these inefficiencies.
(vii) Cost accounting helps the management in knowing the costs of different alternatives and selecting the most advantageous course of action. Decisions like produce or buy, continue or drop a product, operate or shut down, etc. and other short-term decisions can be made easily with the help of cost accounting data.