1.7 Advantages And Limitations Of Cost Accounting

to monitor costs and allocate budgets: everything has a cost in an organisation and collecting data can help estimate the return on each investment.

For instance, a business that uses the variable costing approach allows the management to analyze the actual production costs, and this allows controlling costs since one can identify the differences between the actual and budgeted amounts. Additionally, through variable costing the management focuses on controlling costs to establish better cost control practices. It is easier to control the variable production costs compared to fixed production costs, and the appropriate level of management then makes

By linking cost management efforts to budgeting, companies improve the quality of information available for managers to use in developing their budgets. Accurate cost information is fundamental to budgeting. Companies that use accurate cost management techniques and provide budget developers with ready access to cost information improve both the accuracy and the speed of their budget process.

Cost control – if costs are not measured by a company then their profits will be adversely affected, therefore budgeting is one way to control cost as it gives an business an

The management of the cost of the company's product is an important part, which a cost accountant has to deal with. The profit of the company depends on the extent of the control on the production cost of the product. As the increase in sales and the profitability is the main aim of the management, so it will attract more conflicts of views and multiple sources of actions. A cost accountant has work in this direction and clears the things to the management so that they can have appropriate decisions with regard to the product, its costs and the company's profits at

A manufacturer may employ a job order cost system for some of its products and a process cost system for others.

makes the organization to commit decision errors because of the poor cost information more probable and costly. So to improve the cost information to monitor trends in costs in future

Objective: Explain how cost accounting systems are used to determine the cost of a product, service, customer, or other cost objective.

Cost accounting is not a solution to management problems. It is a management tool designed to provide information that facilitates sound decisions. The two primary objectives of cost accounting are 1) to match cost with revenue and 2) to match resource consumption with the units of service provided.

MULTIPLE CHOICE QUESTIONS 1. Consider the following statements regarding traditional costing systems: I.Overhead costs are applied to products on the basis of volume-related measures. II.All manufacturing costs are easily traceable to the goods produced. III.Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and III. E. II and III. Answer: D LO: 1 Type: N 2. Many traditional costing systems: A. trace manufacturing overhead to individual activities and require the development of numerous activity-costing rates. B. write off

For example having 15 cost pools (activities), each with a predetermined overhead rate used to assign overhead costs to the company’s 80 products—not an unrealistic example for a large company. The accounting costs incurred to maintain such a system can be prohibitively high.

Measuring cost behavior enables cost accountants to understand and quantify how an institution’s activities impact its costs. The information obtained from the cost accountants could be used by managers to make plausible decisions such as evaluating strategic and operational improvement programs, making appropriate short-term pricing and operating decisions, and planning and budgeting on the

The statement “Cost accumulation to determine the cost of goods sold is an example of the control function of management accounting work” is false. cost accumulation suggests the route in which expenses are gathered and identified with specific client, group, employments, request, groups, division and strategy where as a control in management accounting work is identified with the complete method of planning and control of the organization organizing in evaluating the people performance with respects achieving the end objective furthermore in the outlining and working of framework in accomplishing organizational goals. (2016)

I, Le Nguyen Thanh Nam hereby confirm that this assignment is my own work and not copied or plagiarized from any source. I have referenced the sources from which information is obtained by me for this assignment.

Marginal cost: This is the cost of a unit of a product or service, which would be avoided if that