Question

A student planning a career in management wondered why it was important to learn cost and management accounting. How would you respond? Give some examples to support your point of view.

Answer 1

It is important to learn cost and management accounting for a student who is planning a career in management as without learning cost and management accounting, one will not be able to take an effective decision on pricing a product, maximizing the profits and incurring the costs in an effective manner. Every organisation intends to achieve these goals of maximizing the profits, reducing the costs and pricing the product in an effective manner in competitive markets and the management helps the organisation in achieving these goals by analyzing various costs incurred in producing the product. So therefore the importance of Cost and management accounting increases and some of the examples are as under :-

EXAMPLES OF IMPORTANCE OF COST and MANAGEMENT ACCOUNTING TO THE MANAGEMENT AS UNDER:-

1. It helps in determining the price of a product. While determining the price of a product, cost expenditures play a vital role and therefore costing data helps in analyzing various costs incurred and price a product.

2. It helps in making reasonable estimates on the basis of reliable costs data .

3. It helps in distinguishing between profitable and non-profitable production lines.

4. It helps in removal of various losses and wastages during the production .

5. It helps in making comparisons on the basis of costs data and supports the management in formulating future course of action.

6. . It helps in forecasting sales, budgets.

7. It helps in formulating accounting policies, taxation policies and procedures.