5 Questions
What is cost according to the Chartered Institute of Management Accountants (CIMA), London?
The amount of expenditure (actual or notional) incurred on or attributable to a specified thing or activity
What method is applicable for ascertaining the cost per unit if the manufacturer produces only one product?
Dividing the total expenditure incurred by the total units produced
What are manufacturing organizations interested in ascertaining?
The cost per unit of the product manufactured
What is necessary if a manufacturer produces more than one product?
Splitting up the total expenditure among the various products so that the cost of each product can be ascertained separately
What do organizations rendering services like transport undertaking, canteen, electricity company, and municipality aim to ascertain?
The costs of the service it renders
Study Notes
Cost Definition
- According to the Chartered Institute of Management Accountants (CIMA), London, cost refers to the expenditure incurred to achieve a specific objective.
Cost Ascertainment
- If a manufacturer produces only one product, the cost per unit can be ascertained using the unit costing method.
Manufacturing Organizations
- Manufacturing organizations are interested in ascertaining the total cost and cost per unit of production.
Multiple Product Manufacturing
- If a manufacturer produces more than one product, it is necessary to use job costing or operation costing methods to ascertain the cost per unit.
Service Organizations
- Organizations rendering services like transport undertaking, canteen, electricity company, and municipality aim to ascertain the cost of service provided to their customers.
Test your knowledge of cost in economics with this quiz that covers the definition and types of costs as well as their significance in business operations.
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