Cost accounting goal congruence refers to the degree to which cost accounting goals are consistent with one another.
It describes how a company will measure performance, direct activities, and communicate financial information.
Cost accounting systems can track many different areas of a business.
Cost accounting goals can be incongruent or in conflict with one another.
Cost management systems should achieve goal congruence, where different areas of the company agree to use common measurements and financial information.
Cost accountants work with other departments within an organization to align their cost analysis efforts.
Cost Accounting Goal Congruence is essential because it allows a company to unify its financial information and share it throughout the entire organization.
Cost accountants should work closely with business leaders to align different costs accounting goals, such as process improvement and strategic planning, then create an integrated plan for success.
Cost accounting systems can provide valuable insight into a company’s efficiency and effectiveness in any number of areas, including:
There are several different ways to measure Cost Accounting Goal Congruence. Some companies use Cost Accounting Goal Congruence Indexes to measure how well their different Cost Accounting Goals are aligned.
Cost accountants track the cost data of up to five Cost Accounting Goals across several areas, including:
Companies can receive a numerical value for each Cost Accounting Goal they track. The numerical values are averaged to calculate a Cost Index for each Cost Accounting goal.
If the Cost Accounting Goals have a high average index score, then they are based on the same Cost Accounting Standards.
Companies can also track Costing Goals using a system of Cost Profiles. Cost profiles contain an array of information about each Cost Accounting Goal’s cost components, management, and budgeting.
Some examples of cost profile categories include:In this case, companies would want to align their Cost Accounting Goals so that each one has a Cost Profile that is consistent with other Cost Accounting Goals.
Companies achieve Cost Accounting Goal Congruence when they share similar Costing Standards and Cost Profiles, creating a uniform cost management system.
Cost accounting goals should also be aligned with an organization’s strategic plan to provide accurate financial information that drives decision-making throughout the company.
Cost accountants can also develop Cost Accounting Standard procedures that are used by other departments, creating common efficiency and effectiveness measures.
There are two types of Cost Accounting Goal Congruence: Cost Accounting Standard Congruence and Cost Performance Measure Congruence.
It should be consistent because they help focus employees on common measurements and cost data. Each goal should have the same Costing Standards so that different Cost Accounting Goals are measured in the same way.
It is an important part of Cost Accounting Goal Congruence because this should be consistent across Cost Accounting Standards. Cost performance measures help employees compare different Costing Goals that are measured with different Costing Standards.
If there are incongruences between Cost Performance Measures, Cost Accountants can develop Cost Accounting Standard procedures to ensure Cost Performance Measures are more consistent.
This is a Cost Accounting Goal that has a Cost Profile of specific product inventory cost. This Cost Performance Measure should have Costing Standards for direct materials and conversion costs.
This is a Cost Accounting Goal that has a Cost Profile of specific process inventory cost. This Cost Performance Measure should have Costing Standards for direct materials, direct labor, and overhead costs.
This is a Cost Accounting Goal that has a Cost Profile that includes the total cost in the plant. Plant-wide Cost Performance Measures include Total Operating Cost and Cost per Unit.
These Cost Accounting Goals can be incongruent because Plant-wide Cost Analysis Cost Accounting Goal Cost Performance Measures do not include a specific product or process cost.
This means that the Cost Performance Measures would not compare to Costing Standards for Product Costing and Process Costing Cost Accounting Goals.
Cost Accounting Goal Congruence is when Costing Standards and Cost Profiles are consistent across Cost Accounting Goals.
Cost accountants should align Cost Accounting Goals with an organization’s strategic plan to provide accurate financial information that drives decision-making throughout the company.
Cost Performance Measures should be accurate and consistent across Cost Accounting Goals which should have Costing Standards.
This is when costing standards and cost profiles are consistent across cost accounting goals.
It matters because costing standards and cost performance measures should be accurate and consistent across cost accounting goals, which should have costing standards.
Companies can track costing goals using cost accounting cost profiles.
There are several benefits, including cost accountants developing costing standards that reflect cost accounting goal congruence and ensuring cost performance measures are accurate and consistent across cost accounting goals.
Some cost accounting goals that may be incongruent include the following: Product Costing Cost Accounting Goal, Process Costing Cost Accounting Goal, and Plant-Wide Cost Analysis Cost Accounting Goal.
About the Author
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
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