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Pricing Schools Business

Features Pricing Schools Business

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Introduction to Cost Accounting

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Questions and Answers

What is the major purpose of cost classification in business?

To analyze the economic conditions of the country

To estimate the profit and understand its relationship with costs and price (correct)

To determine the market demand for the product

To calculate the total expenditure of the business

Why is costing considered necessary in the field of business?

To maximize revenue through aggressive marketing

To ensure equal distribution of profits among shareholders

To operate activities with utmost efficiency and at the lowest cost (correct)

To comply with legal regulations

What does cost accounting help to determine?

The market share of the company's products

The customer satisfaction levels

The advertising and promotional expenses

The costs of products through classification, recording, and allocation of expenditure (correct)

In the given example, what is the total cost of producing a mobile phone?

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What is the profit per device in the given example?

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Study Notes

Cost Classification in Business

The major purpose of cost classification in business is to identify and segregate costs into different categories to facilitate informed decision-making.

Importance of Costing in Business

Costing is considered necessary in the field of business because it helps to determine the profitability of a product, identify areas of cost reduction, and make informed pricing decisions.

Cost Accounting

Cost accounting helps to determine the total cost of producing a product or service, which includes the calculation of fixed and variable costs, direct and indirect costs.

Example: Total Cost of Producing a Mobile Phone

In the given example, the total cost of producing a mobile phone is the sum of all costs incurred, including material, labor, and overhead costs.

Example: Profit per Device

The profit per device in the given example is the difference between the selling price and the total cost of producing a mobile phone, providing insight into the profitability of each device.

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Description

This quiz introduces the concept of cost accounting as a specialized branch of accounting, developed to address the limitations of financial accounts. It emphasizes the importance of operating business activities with efficiency and low cost.