Question

Cost management has evolved from a focus on measurement to one of identifying those measures that are critical to the organization’s success. Given this new focus, indicate which one of the following types of cost management systems cost managers are likely to be striving for:

1- A system that tracks key operating data and develops accurate cost information

2- A system that focuses on reliable financial reports

3- Basic transaction reporting systems

4-A system in which strategically relevant cost management information is an integral part
:

Answer 1

Cost management is the process of planning and controlling the budget of a business. Cost management is a form ofmanagement accounting that allows a business to predict impending expenditures to help reduce the chance of going over budget.

Main Disadvantages of Cost Accounting

The benefits of cost accounting come with a price. Since costing methods differ from organization to organization, it's not clear how these costs might manifest themselves until a specific firm is examined.

Generally speaking, complex cost accounting systems require a lot of work on the front end, and constant adjustments need to be made for improvements. This complexity consumes time and resources and leaves room for misinterpretation.

Even if the rigidity of financial accounting creates some inherent disadvantages, it does remove the uncertainty and misapplication of accounting guidelines of cost accounting. Uncertainty equals risk, which always comes at a cost. This means additional, and often more vigorous reconciliationto verify accuracy.

Higher-skilled accountants and auditors are likely to charge more for their services. Employees have to receive extra training and must sufficiently cooperate with data input; non-cooperation can render ineffective an otherwise beautifully constructed system.

Cost Versus Benefits of Cost Accounting

The repeated tradeoff in any accounting method is accuracy versus expediency. Cost accounting reflects this more dramatically than other accounting methods because of its pliability. Every business needs to find its own balance between the two.

Costing methods are typically not useful for figuring out tax liabilities, which means that cost accounting can't provide a complete analysis of a business' true costs. It's easy enough to compensate for this by combining financial accounting with cost accounting, but it, nevertheless, highlights a flaw in cost accounting.  

As per my opinion cost management is lacking in above 1, 2 and 3 points.. Student can ask for further clarification if not satisfied with the above clarification given.