Final answer:
Cost accounting objectives include ascertaining individual costs, facilitating control, minimizing costs, serving as a basis for pricing, and aiding in management decisions. They involve analyzing various types of costs and calculating profits to aid potential profit realization. Understanding the difference between accounting and economic profit is also crucial for businesses.
Step-by-step explanation:
The objectives of cost accounting are to help a business manage its finances by tracking, analyzing, and optimizing costs associated with production and operations. Specifically, the objectives can be outlined as follows:
- Ascertain costs of each product, cost, job operation, or service.
- Facilitate control of activities or processes.
- Minimize the costs of operations.
- Serve as the basis in pricing.
- Assist management in decision-making.
Understanding the relationship between production and costs is vital, as every factor of production has a corresponding factor price. In cost accounting, it is important to analyze short-run costs including total cost, fixed cost, variable cost, marginal cost, and average cost. Additionally, calculating average profit and evaluating patterns of costs help in determining potential profit. Recognizing the difference between accounting profit and economic profit is also crucial: accounting profit refers to total revenue minus explicit costs, while economic profit considers both explicit and implicit costs.