How well individual cost accounting objectives line up with one another is what we call “goal congruence.”
It lays out the methods by which a business will track results, guide operations, and disseminate financial data.
A company’s cost accounting system can keep tabs on a wide variety of metrics.
It is possible for cost accounting objectives to be incompatible with one another.
Systems for managing costs effectively should foster goal congruence, in which different divisions of an organization agree to use the same metrics and monetary data.
When it comes to analyzing costs, cost accountants collaborate with various teams across a business.
What’s the Big Deal?
Economic Analysis With the help of Goal Congruence, a company can consolidate and disseminate its financial data to all employees.
In order to achieve their goals in cost accounting, such as process improvement and strategic planning, cost accountants need to collaborate closely with business leaders.
A company’s efficiency and efficacy in many different areas can be better understood with the help of a cost accounting system.
Putting a price on quality-of-life changes
Cost accounting and planning
Methods of Managing Expenses
Providing information relevant to the company’s or industry’s financial standing, including revenue, expenses, margins, and other metrics
Where Do You Find the Numbers?
Cost Accounting Objective Congruence can be quantified in a number of ways. Some businesses use something called a Cost Accounting Goal Congruence Index to evaluate the degree to which their various Cost Accounting Goals are in sync with one another.
Cost accountants collect and analyze data from a wide variety of sources to achieve up to five Cost Accounting Goals, such as
Expenses and Operating Costs
Productivity and instruction for workers
Accuracy and consistency in the meters
Use of Resources and Tools
Plans, methods, and strategies for a manufacturing facility or business
Each Cost Accounting Objective that is monitored by a company can be assigned a quantitative number. For each Cost Accounting objective, an associated Cost Index is computed by taking the mean of the associated numbers.
The Cost Accounting Objectives are consistent with one another if their average index score is high.
Using a Cost Profiles system, businesses may monitor their progress toward their Costing Goals. The cost profiles detail the various aspects of each Cost Accounting Objective’s budgeting, administration, and oversight processes.
The following are some instances of different types of cost profiles:
Value-based cost metrics
Methods for Limiting Expenses
When Cost Accounting Objectives share a common Cost Profile, it indicates that their management is comparable. If their Cost Profiles are different, management will be quite different.
In such a scenario, businesses should coordinate their Cost Accounting Objectives to ensure that their respective Cost Profiles are in line with one another.
Cost accounting objective congruence has several positive outcomes.
When organizations have consistent Costing Standards and Cost Profiles, they have achieved Cost Accounting Goal Congruence.
Financial information used for making business-wide decisions relies heavily on precise cost accounting goals, which should be in line with the organization’s overall strategic strategy.
Cost accountants can also standardize techniques for measuring productivity and efficiency across organizations by developing Cost Accounting Standards.
Cost Accounting Objectives and Their Varieties
Cost Accounting Standard Congruence and Cost Performance Measure Congruence are two types of Cost Accounting Goal Congruence.
Harmonization of Cost Accounting Practices
They assist employees focus on standard metrics and financial information, therefore they should be consistent. In order to compare and contrast the effectiveness of various Cost Accounting Objectives, they should all be measured using the same set of Costing Standards.
Since this should be uniform throughout Cost Accounting Standards, it is a crucial part of Cost Accounting Goal Congruence. Employees can use cost performance measurements to evaluate and compare various Costing Objectives against a variety of Costing Criteria.
Cost accountants can create Cost Accounting Standard processes to guarantee Cost Performance Measures are more consistent if there are discrepancies between them.
Some potentially incompatible Cost Accounting Objectives
The following are examples of potentially conflicting Cost Accounting Objectives:
There is a specific product inventory cost associated with this Cost Accounting Objective. Direct materials and conversion costs should be accounted for in the Costing Standards for this Cost Performance Measure.
Costing in Process
A specific process inventory cost is the Cost Profile for this Cost Accounting Objective. Direct materials, direct labor, and overhead Costing Standards should be included in this Cost Performance Measure.
Budgeting for the Entire Plant
The full plant cost is accounted for in the Cost Profile for this Cost Accounting Objective. Total operating cost and cost per unit are two examples of plant-wide cost performance indicators.
Plant-wide cost analysis can reveal discrepancies between these cost accounting objectives. There is no mention of product or process costs in the Cost Accounting Objective Performance Measures.
Since the Costing Standards for Product Costing and Process Costing Cost Accounting Goals are not being met, the Cost Performance Measures cannot be compared to them.
Suggestions for Achieving Cost Accounting Objectives
Cost accountants might take the following measures to guarantee the uniformity of Cost Accounting Objectives:
Create Pricing Policies that are Consistent with Cost Accounting Objectives
Verify the integrity of all Cost Accounting Objectives’ Performance Metrics
Bring Costing Standards in line with Organizational Objectives
Aim of Cost Accounting Conformity occurs when all Cost Accounting Objectives use the same Costing Standards and Cost Profiles.
In order to offer the kind of reliable financial data that can be used to make important business decisions, cost accountants should make sure that their Cost Accounting Goals are in line with the organization’s overall strategy.
Accurate and consistent Cost Performance Metrics across Cost Accounting Objectives that have Costing Standards are essential.