The Role of Cost Accounting in Business Planning, Control, and Decision Making

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Today, the scope of cost accounting has enlarged to such an extent that it now refers to the collection and providing all sorts of information that assists the executives in fulfilling the organizational goals.


Modern cost accounting is being termed as management accounting, since managers being the primary user of accounting information are increasingly using the data provided by the accounts, setting objectives and controlling the operations of the business.
Today cost accounting is much more than an inventory cost tracking system. Cost accounting involves determining the costs of products and activities, but it does have a broader role; to furnish management with information used in planning and controlling activities, in improving quality and efficiency, and in formulating strategic policy. To be more specific, cost accounting can help management achieve the following:
• Formulating and implementing plans and budgets that motivate employees toward the achievement of company goals.
• Establishing cost tracking methods that allow control of operations, cost savings and improvement in quality.
• Controlling inventory cost, minimizing inventory investment, and determining the cost of each product or service.
• Pricing products and services in ways that are congruent with organizational goals.
• Making prudent decisions that impact both short-term and long-term revenues and expanses.
Technological changes and management innovations are drastically changing the nature of costs. Many technologically advanced companies have lower inventory levels; use less labor and often experience increasing levels of fixed costs. ...
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