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What is the role of cost accounting in decision making

What is the role of cost accounting in decision making.

Answers

Martin
1. Score keeping and reporting
Cost accounting is important in accumulating data and reporting results to all levels of
management describing how the organization is performing. Feedback from scorekeeping and
attention directing often leads managers to revise planning decisions and sometimes make new
strategic decisions.

2. Selection of the best courses of action from among alternatives
Cost accounting is involved in comparative analysis of alternatives for decision making. This
information is valuable input for an important strategic decision. The goals of the analysis to
assist management make better decisions in selecting the best alternatives.

3. Attention directing
Cost accounting helps managers focus on opportunities and problems. For example, variance
analysis identifies areas where management should lay more emphasis on in terms of cost
reduction and revenue maximization.

4. Budgeting
Cost accounting assists management in planning and forecasting future financial position. Cost
accountants play a crucial role in profit forecasting, cash budgeting, materials and labour
budgeting and preparing the overall organization budget. This branch of accounting also assists in
estimating future costs

5. Other areas in which accounting assists management in decision making
- Application of economic order quantity in making optimal inventory purchase decisions.
- Assessing departmental performance through prudent cost allocation methods.
- Making pricing decisions by accurately allocating and apportioning costs to job units.
marto answered the question on February 26, 2019 at 09:39

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