Essential benefits of a Cost Accounting System may be scheduled as follows:
1. A good Cost Accounting System helps in recognizing unprofitable activities, defeats or inefficiencies in a few forms.
2. The relevance of cost reduction methods, operations research methods and value analysis technique, helps in achieving the goal of economy in anxiety's operations. Continuous attempts are being made by the business organization for finding new and improved techniques for reducing costs.
3. Cost Accounting is functional for identifying the exact reasons for decrease or increase in the, profit/loss of the business. It also facilitates in identifying unbeneficial products or product lines so that these may be reduced or alternative measures may be taken.
4. It gives information and data to the management to give out as guides in making decisions concerning financial considerations. Guidance may also be agreed by the Cost Accountant on a host of problems for instance, whether to purchase or manufacture a given component, whether to accept orders below cost, which machine to obtain when a number of choices are on hand.
5. Cost Accounting is quite valuable for price fixation. It serves as a point to test the adequacy of selling costs. The price determined may be helpful for preparing approximations or filling tenders.
6. The use of cost accounting technique viz., variance analysis, indicates the deviations from the pre-determined level and consequently demands suitable action to reduce such deviations in prospect.
7. Cost assessment helps in cost control. Such a comparison may be made from stage to stage by using the figures in reverence of the same unit of firms or of quite a few units in an industry by employing uniform costing and inter-firm contrast methods. Comparison may be made regarding costs of jobs, processes or cost centers.
8. A system of costing gives figures for the use of Government, Wage Tribunals and additional bodies for dealing with various problems. Some such difficulties include price fixation, tariff protection, price control, wage level fixation, etc.
9. The cost of inactive capacity can be with no trouble worked out, when an anxiety is not working to full capacity.
10. The use of Marginal Costing technique may help the executives in taking short term choices. This technique of costing is extremely useful during the period of trade depression, as the orders may have to be accepted throughout this period at a price less than the total cost.
11. The marginal cost has linear relationship by means of production volume and so in formulating and solving "Linear Programming Problems", marginal cost is valuable.