## Functions of Cost and Management Accounting
Five core functions — these describe what the cost and management accounting department actually does.
### 1. Collection and Accumulation of Cost
- Gather data on all elements of cost in the production or service process.
- Includes:
- Direct costs: materials, labour (traceable to cost objects)
- Indirect costs: overheads (allocated/absorbed)
- Goal: track and record expenses accurately as the raw input for all other functions.
### 2. Assigning Costs to Cost Objects
- Cost objects = items for which costs are measured (products, services, projects, departments).
- Allocate accumulated costs to each cost object.
- Result: total cost associated with each object is determined, enabling profitability analysis.
### 3. Cost Control through Budgeting and Analysis
- Establish budgets and standards for specific periods or activities.
- Compare actual costs with predetermined standards.
- Identify, analyse, and report deviations (variances).
- Enables corrective action and continuous improvement.
### 4. Provision of Relevant Information for Decision Making
- Sets up and maintains a Management Information System (MIS).
- Provides timely, relevant information to management at all levels.
- Supports decisions on:
- Cost optimisation
- Pricing strategies
- Product plans and product mix
- Marketing strategies
### 5. Measurement and Evaluation of Responsibility Centres
- Different departments/segments are responsibility centres (cost centres, profit centres, investment centres).
- Collects performance data: time taken, wastage, process efficiency.
- Analyses data, prepares reports, assesses performance against standards.
- Enables management action to improve underperforming centres.