Cost Accounting and Management Techniques

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Questions and Answers

What is the primary objective of cost accounting in relation to production?

To determine the selling price of goods

To prepare the purchase budget

To provide cost data for fixation of selling price (correct)

To formulate purchase policies and procedures

What is the key characteristic of Direct Costing?

It only assigns variable manufacturing costs to inventory (correct)

It is used to determine the profitability of each product

It is used to prepare the purchase budget

It assigns both fixed and variable costs to inventory

What is the main advantage of Uniform Costing?

It is used to determine the selling price of goods

It allows multiple undertakings to use the same cost principles and practices (correct)

It considers both quantitative and qualitative data

It is a method of costing that assigns both fixed and variable costs to inventory

What is the primary function of the purchase department?

To formulate purchase policies and procedures Signup and view all the answers

What is the primary objective of cost control and management?

To advise management on future expansion policies Signup and view all the answers

What is the main characteristic of Absorption Costing?

It assigns both fixed and variable costs to inventory Signup and view all the answers

What is the primary objective of operating costing?

To ascertain the cost of production of goods manufactured Signup and view all the answers

What is the main advantage of using unit costing?

It provides a perpetual inventory of stores and other materials Signup and view all the answers

What is the primary objective of standard costing?

To facilitate cost control Signup and view all the answers

What is the main difference between standard cost and actual cost?

Standard cost is the expected cost, while actual cost is the real cost Signup and view all the answers

What is the purpose of job costing procedure?

To receive and process orders Signup and view all the answers

What is the normal process loss?

The loss that is unavoidable due to the inherent nature of the production process Signup and view all the answers

What is the primary purpose of setting up organizational goals?

To translate plans into action Signup and view all the answers

What is the relationship between standard cost and budget?

Standard cost is used to determine the budget Signup and view all the answers

What is the main advantage of standard costing?

It facilitates cost control and management Signup and view all the answers

What is the purpose of continuous comparison of actual with budget?

To facilitate cost control and management Signup and view all the answers

What is the primary purpose of distinguishing profitable jobs from unprofitable jobs in job costing?

To identify areas for cost reduction Signup and view all the answers

What is a disadvantage of job costing?

It involves more clerical works Signup and view all the answers

What is the main objective of cost control and management?

To optimize resource utilization Signup and view all the answers

What is the purpose of standard cost in job costing?

To provide a basis for cost control and management Signup and view all the answers

What is the role of budgetary control in job costing?

To communicate plans with responsibility centre managers Signup and view all the answers

What is the primary advantage of using job costing in production planning?

It is essential for future production planning Signup and view all the answers

What is the main difference between job costing and other costing methods?

Each job is treated as a separate entity Signup and view all the answers

What is the purpose of cost benefit analysis in job costing?

To allocate resources based on cost benefit analysis Signup and view all the answers

Study Notes

Cost Accounting

Objective: to ascertain the cost of production of goods manufactured
Provides cost data for fixation of selling price
Helps in ascertaining profitability of each product
Advises management on future expansion policies
Provides a perpetual inventory of stores and other materials

Uniform Costing

A system of costing where several undertakings use the same department separately
Considers both quantitative and qualitative data

Direct Costing

A method where only variable manufacturing costs are assigned to inventory and cost of goods sold

Absorption Costing

A technique of setting up organisational goals and formulating plans for achieving them

Functions of Purchase Department

To prepare purchase budget
To formulate purchase policies and procedures
To place purchase orders
To choose the most favourable suppliers
To receive enquiry and send quotations

Job Costing Procedure

Receiving of order
Production order and allotting production order number
Recording of cost and transfer of cost from one process to another
Future production planning
Helps to distinguish profitable jobs from unprofitable jobs
Helps to identify defective works
Selling prices of special orders can easily be fixed

Disadvantages of Job Costing

Involves more clerical work

Standard Costing

A technique that uses a predetermined cost for evaluating actual performance
Expected cost of producing one unit
Helps in setting up organisational goals and formulating plans for achieving them

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Description

Learn about cost accounting concepts, including uniform costing and direct costing, and their applications in business decision-making and management. Understand how these techniques help in ascertaining profitability and informing future expansion policies.