Objections Against Cost Accounting - apk upload

Objections Against Cost Accounting

A number of objections are generally raised against the introduction of costing on various grounds. The following are some of the important objections usually raised:

1. Want of necessity- It has been argued that costing is of recent origin and that industries prospered in the past and are still prospering without the aid of costing and, therefore, expenditure incurred in installing a costing system wouldnbe an unnecessary expenditure. This argument overlooks the fact that modern industries are running under highly competitive conditions and that every manufacturer should know the actual cost of production to decide how far he can reduce the selling price. Many industrial failures in the past may be attributed to the lack of knowledge on the part of manufacturer of actual cost of production and, therefore, selling products below cost.

2. Inapplicability- It is argued that modern methods of costing are inapplicable to many types of industries. It is true that costing cannot be applied with advantage to trading concerns and concerns of small size. But in many cases some methods of costing can always be devised to suit the requirements of the business. It should be clearly understood that there is no stereotyped system of costing which can be applied to all types of industries. The system of costing should be so devised as to suit the business but not the business to suit system.

3. Failure in many cases- It is argued that the adoption of costing system failed to produce the desired results in many cases and, therefore, the system is defective. The failure of a system may be due to several causes such as apathy or indifference of management, lack of adequate fa-lcilities, non-co-operation or opposition from the employees. So it is hasty to find fault with the system, if it fails to produce the desired results.

4. Mere matter of forms and rulings- It is argued
that after some time, a costing system degenerates into a matter of forms and rulings. This is not the fault of the system. It is the fault of the way in which the system is maintained. Forms and rulings are essential for a costing system but they must be revised and brought up-to-date in the light of altered conditions. If this is not done, the system is bound to degenerate into a mere matter of forms and rulings.

5. Expensive- It is said that the cost involved in in-
stalling and working a cost system is out of all proportions to the benefits derived there from. It may be stated in this connection that a costing system must be a profitable investment and should produce benefits commensurate with the expenditure incurred on the system. If care is taken to devise a costing system to suit the requirements of the industry and avoid unnecessary elaboration, expenditure incurred in installing and operating the system will be a profitable investment and will bring adeqate return.

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