The main objectives or purpose of cost accounting are as follows:
1. Cost accounting is used to prepare budgets and estimates.
2. It helps in ascertaining product’s profitability and suggests various techniques and steps to reduce the cost.
3. Cost accounting helps management greatly in making the decision about the pricing of the products at the appropriate time.
4. It helps in identifying waste of materials, overheads and time,
5. It helps in identifying the right level of inventory in the warehouse. This causes huge savings in holding cost.
6. A complete cost accounting system highlights the profitable segments of the business. So, management can focus their attention to the right segment to improve the company’s position.
7. Cost accounting helps the management in comparing their cost with that of rival companies. As a result, various loopholes get highlighted which management can control to improve its performance.
8. It allows the calculation of the cost of goods manufactured and cost of goods sold. So, management comes to know the profit of the company in a timely manner.