Understanding Cost in Economics
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Questions and Answers

What is cost according to the Chartered Institute of Management Accountants (CIMA), London?

  • The resource given money or money’s equivalent expressed in monetary units
  • The total units produced divided by the total expenditure incurred
  • The amount of expenditure (actual or notional) incurred on or attributable to a specified thing or activity (correct)
  • The total expenditure among the various products to ascertain the cost of each product separately

    • What method is applicable for ascertaining the cost per unit if the manufacturer produces only one product?

  • Analyzing the cost per unit of each item of expenditure that goes into the making of it
  • Dividing the total units produced by the total expenditure incurred
  • Dividing the total expenditure incurred by the total units produced (correct)
  • Splitting up the total expenditure among the various products

    • What are manufacturing organizations interested in ascertaining?

  • The total expenditure among the various products to ascertain the cost of each product separately
  • The costs of the service it renders
  • The resource given money or money’s equivalent expressed in monetary units
  • The cost per unit of the product manufactured (correct)

    • What is necessary if a manufacturer produces more than one product?

    <p>Splitting up the total expenditure among the various products so that the cost of each product can be ascertained separately</p> Signup and view all the answers

    What do organizations rendering services like transport undertaking, canteen, electricity company, and municipality aim to ascertain?

    <p>The costs of the service it renders</p> Signup and view all the answers

    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.

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    Description

    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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