Crossing all functional areas, a cost management system can be viewed as having six primary goals: (1) develop reasonably accurate product costs, especially through the use of cost drivers (activities that have direct cause-and-effect relationships with costs); (2) assess product/service life-cycle performance; (3) improve understanding of processes and activities; (4) control costs; (5) measure performance; and (6) allow the pursuit of organizational strategies.
First and foremost, a CMS should provide the means to develop accurate product or service costs. This requires that the system be designed to use cost driver information to trace costs to products and services. The system does not have to be the most accurate, but it should match benefits of additional accuracy with expenses of achieving additional accuracy. Traceability has been made easier by improved information technology, including bar coding.
The original purpose of a cost accounting system was to control costs. This is still an important function of cost management systems given the current global competitive environment. A cost can be controlled only when the related activity is monitored, the cost driver is known, and the information is available. For example, if units are spoiled in a process, the CMS should provide information on spoilage quantity and cost rather than “burying” that information in other cost categories. Additionally, the cost management system should allow managers to understand the process so that the underlying causes of the spoilage can be determined. Armed with this information, managers can compare the costs of fixing the process with the benefits to be provided.