Certified Supply Chain Professional (CSCP) Practice Exam

What is the primary function of cost accounting?

1. Reporting costs

2. Predicting sales trends

3. Evaluating employee performance

4. Managing inventory levels

The correct answer is: Reporting costs

The primary function of cost accounting is to report costs. Cost accounting focuses on capturing all the costs associated with a company's production processes, including materials, labor, and overhead. This detailed reporting enables organizations to analyze expenses, identify areas where they can reduce costs, and enhance overall efficiency. By providing valuable insights into the cost structure of products or services, cost accounting supports budgeting, pricing decisions, and financial planning. While predicting sales trends, evaluating employee performance, and managing inventory levels are important activities within an organization, they are not the central focus of cost accounting. Instead, these activities may utilize the information generated by cost accounting, but they pertain to different aspects of business management and strategic planning. Thus, accurately reporting costs is the core objective of cost accounting.