Issues Addressed under Strategic Cost Management

Issues Addressed under Strategic Cost Management

1. Reveals Profitable and Unprofitable Activities: A system of cost accounting reveals profitable and unprofitable activities.

2. Helps in Cost Control: Cost accounting helps in controlling costs with special techniques like standard costing an budgetary control.

3. Helps in Decision-making: It supplies suitable cost data and other related information for managerial decision-making such as introduction of a new product line, replacement of old machinery with an automatic plant, make or buy, etc.

4. Guides in Fixing Selling Prices: Cost is one of the most important factors to be considered while fixing prices.

5. Helps in Inventory Control: Perpetual inventory system, which is an integral part of cost accounting helps in the preparation of interim profit and loss account.

6. Aids in Formulating Policies: Costing provides such information as enables the management to formulate production and pricing policies and preparing estimates of contracts and tenders.

7. Helps in Cost Reduction: It helps in the introduction of a cost reduction programme and finding out new and improved ways to reduce costs.

8. Reveals Idle Capacity: A concern may not be working to full capacity due to reasons such as shortage of demand, machine breakdown or other bottlenecks in production.

9. Checks the Accuracy of Financial Accounts: Cost accounting provides a reliable check on the accuracy of financial accounts with the help of reconciliation between the two at the end of the Accounting period.

10. Prevents Frauds and Manipulation: Cost audit system, which is part of cost accountancy, helps in preventing manipulation and frauds and thus reliable cost data can be furnished to management sand others.

Leave a Reply