Cost Accounting

电商企业成本核算主要方法Cost accounting is a vital aspect for e-commerce businesses to understand the financial health and efficiency of their operations. There are several methods that can be used to calculate and allocate costs within an e-commerce business. One common method is activity-based costing (ABC), which involves identifying and assigning costs based on the activities that drive costs in the business. This method helps to more accurately track the costs associated with specific activities and can be useful for tracking the profitability of different products or services.成本核算是电子商务企业了解其运营的财务状况和效率的重要方面。

有几种方法可用于计算和分配电子商务企业的成本。

一个常见的方法是基于活动的成本核算（ABC），这涉及识别和分配基于驱动业务成本的活动的成本。

该方法有助于更准确地跟踪与特定活动相关的成本，并可以用于跟踪不同产品或服务的盈利能力。

Another common method of cost accounting in e-commerce businesses is absorption costing, which involves allocating both variable and fixed costs to products or services based on theanticipated production volume. This method helps to spread out the total costs of production across all units produced, providing a more accurate representation of the full cost of producing each unit.电子商务企业中成本核算的另一种常见方法是吸收成本法，这涉及根据预期生产量将可变成本和固定成本分配给产品或服务。

Cost Accounting, 15e (Horngren/Datar/Rajan)Chapter 2 An Introduction to Cost Terms and PurposesObjective 2.11) An actual cost is ________.A) is the cost incurredB) is a predicted or forecasted costC) is anything for which a cost measurement is desiredD) is the collection of cost data in some organized way by means of an accounting system Answer: ADiff: 1Objective: 1AACSB: Analytical thinking2) Comparing budgeted costs to actual costs helps managers to improve ________.A) coordinationB) controlC) implementationD) planningAnswer: BDiff: 1Objective: 1AACSB: Analytical thinking3) Budgeted costs are ________.A) the costs incurred this yearB) the costs incurred last yearC) planned or forecasted costsD) competitor's costsAnswer: CDiff: 1Objective: 1AACSB: Analytical thinking4) Cost assignment ________.A) includes future and arbitrary costsB) encompasses allocating indirect costs to a cost objectC) is the same as cost accumulationD) is the difference between budgeted and actual costsAnswer: BDiff: 1Objective: 1AACSB: Analytical thinking5) A cost system determines the cost of a cost object by ________.A) accumulating and then assigning costsB) accumulating costsC) assigning and then accumulating costsD) assigning costsAnswer: ADiff: 1Objective: 1AACSB: Analytical thinking6) A cost object is anything for which a cost measurement is desired.Answer: TRUEDiff: 1Objective: 1AACSB: Analytical thinking7) Costs are accounted for in two basic stages: assignment followed by accumulation.Answer: FALSEExplanation: Costs are accounted for in two basic stages: accumulation followed by assignment.Diff: 1Objective: 1AACSB: Analytical thinking8) An actual cost is the cost incurred–a historical or past cost.Answer: TRUEDiff: 1Objective: 1AACSB: Analytical thinking9) Accountants define a cost as a resource to be sacrificed to achieve a specific objective.Answer: TRUEDiff: 1Objective: 1AACSB: Analytical thinking10) A cost is a resource sacrificed or forgone to achieve a specific objective.Answer: TRUEExplanation: A cost object could be anything management wishes to determine the cost of, for example, a department.Diff: 1Objective: 1AACSB: Analytical thinking11) Managers use cost accumulation data to make decisions and implement them.Answer: TRUEDiff: 1Objective: 1AACSB: Analytical thinking12) Lucas Manufacturing has three cost objects that it uses to accumulate costs for its manufacturing plants. They are:Cost object #1: The physical buildings and equipmentCost object #2: The use of buildings and equipmentCost object #3: The availability and use of manufacturing laborThe following manufacturing overhead cost categories are found in the accounting records:a. Depreciation on buildings and equipmentb. Lubricants for machinesc. Property insuranced. Supervisors salariese. Fringe benefitsf. Property taxesg. UtilitiesRequired:Assign each of the above costs to the most appropriate cost object.Answer:Cost object # 1 includes categories a, c, and f.Cost object # 2 includes categories b and g.Cost object # 3 includes categories d and e.Diff: 2Objective: 1AACSB: Application of knowledgeObjective 2.21) Which of the following factors affect the direct/indirect classification of a cost?A) the level of budgeted profit for the next yearB) the estimation of time required to complete the orderC) the ability to execute an order in the most cost-efficient mannerD) the design of the operationAnswer: DDiff: 1Objective: 2AACSB: Analytical thinking2) The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is ________.A) cost accumulationB) cost assignmentC) cost tracingD) conversion costingAnswer: BDiff: 1Objective: 1AACSB: Analytical thinking3) Cost accumulation is ________.A) the collection of cost data in some organized way by means of an accounting systemB) anything for which a cost measurement is desiredC) anything for which a profit measurement is desiredD) the collection of profit data in some organized way by means of an accounting system Answer: ADiff: 2Objective: 1AACSB: Analytical thinking4) Which of the following statements about the direct/indirect cost classification is true?A) Indirect costs are always traced.B) Indirect costs are always allocated.C) The design of sales target affects the direct/indirect classification.D) The direct/indirect classification depends on the cost control measures.Answer: BDiff: 1Objective: 2AACSB: Analytical thinking5) Cost tracing is ________.A) the assignment of direct costs to the chosen cost objectB) a function of cost allocationC) the process of tracking both direct and indirect costs associated with a cost objectD) the process of determining the actual cost of the cost objectAnswer: ADiff: 1Objective: 2AACSB: Analytical thinking6) Cost allocation is ________.A) the process of tracking both direct and indirect costs associated with a cost objectB) the process of determining the opportunity cost of a cost object chosenC) the assignment of indirect costs to the chosen cost objectD) made based on material acquisition documentAnswer: CDiff: 1Objective: 2AACSB: Analytical thinking7) The determination of a cost as either direct or indirect depends upon the ________.A) accounting standardsB) tax system chosenC) inventory valuationD) cost object chosenAnswer: DDiff: 1Objective: 2AACSB: Analytical thinking8) Classifying a cost as either direct or indirect depends upon ________.A) the behavior of the cost in response to volume changesB) whether the cost is expensed in the period in which it is incurredC) whether the cost can be easily traced with the cost objectD) whether a cost is fixed or variableAnswer: CDiff: 1Objective: 2AACSB: Analytical thinking9) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line is ________.A) beverages provided daily in the plant break roomB) monthly lease payments for a specialized piece of equipment needed to manufacture the golf driverC) salaries of the clerical staff that work in the company administrative officesD) overheads incurred in producing both golf and soccer equipmentAnswer: BDiff: 1Objective: 2AACSB: Application of knowledge10) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is the ________.A) material used to make the soccer ballsB) labor to shape the leather used to make the soccer ballC) material used to manufacture the soccer studsD) salary paid to plant supervisorAnswer: DDiff: 1Objective: 2AACSB: Application of knowledge11) Which one of the following items is a direct cost?A) Customer-service costs of a multiproduct firm; Product A is the cost object.B) Printing costs incurred for payroll check processing; payroll check processing is the cost object.C) The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object.D) Utility costs of the administrative offices; the accounting department is the cost object.Answer: BDiff: 1Objective: 2AACSB: Application of knowledge12) Indirect manufacturing costs ________.A) can be traced to the product that created the costsB) can be easily identified with the cost objectC) generally include the cost of material and the cost of laborD) may include both variable and fixed costsAnswer: DDiff: 1Objective: 2AACSB: Application of knowledge13) Which of the following is true of indirect costs?A) Indirect costs are always considered sunk costs.B) All indirect costs are included in cost of goods sold.C) Indirect costs always vary in direct proportion to the level of production.D) Indirect costs cannot be traced to a particular cost object in an economically feasible way. Answer: DDiff: 1Objective: 2AACSB: Application of knowledge14) Which of the following statements is true?A) A direct cost of one cost object will always be a direct cost of another cost object.B) Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs.C) All fixed costs are indirect costs.D) All direct costs are variable costs.Answer: BDiff: 1Objective: 2AACSB: Analytical thinking15) Which of the following statements is true of direct costs?A) A direct cost of one cost object is a true sense of the budgeted costs.B) All variable costs are direct costs.C) A direct cost of one cost object can be an indirect cost of another cost object.D) All fixed costs are direct costs.Answer: CDiff: 1Objective: 2AACSB: Application of knowledge16) A cost may be direct for one cost object and indirect for another cost object.Answer: TRUEDiff: 1Objective: 2AACSB: Application of knowledge17) Assigning indirect costs is easier than assigning direct costs.Answer: FALSEExplanation: Tracing direct costs is quite straightforward, whereas assigning indirect costs to a number of different cost objects can be very challenging.Diff: 1Objective: 2AACSB: Application of knowledge18) Improvements in information-gathering technologies are making it possible to trace more costs as direct.Answer: TRUEDiff: 1Objective: 2AACSB: Analytical thinking19) The smaller the amount of a cost the more likely it is economically feasible to trace it to a particular cost object.Answer: FALSEExplanation: The smaller the amount of a cost the less likely it is economically feasible to trace it to a particular cost object.Diff: 1Objective: 2AACSB: Application of knowledge20) A direct cost of one cost object can be an indirect cost of another cost object.Answer: TRUEDiff: 1Objective: 2AACSB: Analytical thinking21) The cost of electricity used in the production of multiple products would be classified as a indirect cost.Answer: TRUEDiff: 1Objective: 2AACSB: Application of knowledge22) The broader the cost object definition, higher the proportion of direct costs are of total costs. Answer: TRUEDiff: 1Objective: 2AACSB: Analytical thinking23) The distinction between direct and indirect costs is clearly set forth in Generally Accepted Accounting Principles (GAAP).Answer: FALSEExplanation: The distinction between direct and indirect costs is not set forth in GAAP. Direct costs of a cost object are related to the particular cost object and can be traced to it in an economically feasible (cost-effective) way. Indirect costs of a cost object are related to the particular cost object but cannot be traced to it in an economically feasible (cost-effective) way.Diff: 1Objective: 2AACSB: Analytical thinking24) Archambeau Products Company manufactures office furniture. Recently, the company decided to develop a formal cost accounting system and classify all costs into three categories. Categorize each of the following items as being appropriate for (1) cost tracing to the finished furniture, (2) cost allocation of an indirect manufacturing cost to the finished furniture, or (3) as a nonmanufacturing item.Cost Cost Nonmanu-Item Tracing Allocation facturingCarpenter wages ________ ________ ________Depreciation - office building ________ ________ ________Glue for assembly ________ ________ ________Lathe department supervisor ________ ________ ________Lathe depreciation ________ ________ ________Lathe maintenance ________ ________ ________Lathe operator wages ________ ________ ________Lumber ________ ________ ________Samples for trade shows ________ ________ ________Metal brackets for drawers ________ ________ ________Factory washroom supplies ________ ________ ________Answer: Cost Cost Nonmanu-Item Tracing Allocation facturingCarpenter wages XDepreciation - office building XGlue for assembly XLathe department supervisor XLathe depreciation XLathe maintenance XLathe operator wages XLumber XSamples for trade shows XMetal brackets for drawers XFactory washroom supplies XDiff: 2Objective: 2AACSB: Application of knowledge25) What are the factors that affect the classification of a cost as direct or indirect?Answer: Several factors affect whether a cost is classified as direct or indirect:The materiality of the cost in question. The smaller the amount of a cost–that is, the more immaterial the cost is–the less likely it is economically feasible to trace it to a particular cost object.Available information-gathering technology. Improvements in information-gathering technology make it possible to consider more and more costs as direct costs.Design of operations. Classifying a cost as direct is easier if a company's facility (or some part of it) is used exclusively for a specific cost object, such as a specific product or a particular customer.Diff: 3Objective: 2AACSB: Analytical thinking26) What are the differences between direct costs and indirect costs? Give an example of each. Answer: Direct costs are costs that can be traced easily to the product manufactured or the service rendered. Examples of direct costs include direct materials and direct manufacturing labor used in a product. Indirect costs cannot be easily identified with individual products or services rendered, and are usually assigned using allocation formulas. In a plant that manufactures multiple products, examples of indirect costs include the plant supervisor's salary and the cost of machines used to produce more than one type of product.Diff: 2Objective: 2AACSB: Analytical thinkingObjective 2.31) Which of the following is true if the volume of sales increases?A) fixed cost increasesB) variable cost decreasesC) variable cost increasesD) fixed cost decreasesAnswer: CDiff: 1Objective: 3AACSB: Application of knowledge2) Which of the following is a fixed cost?A) monthly rent paymentB) electricity expensesC) travel expensesD) direct material costsAnswer: ADiff: 1Objective: 3AACSB: Application of knowledge3) Cost behavior refers to ________.A) how costs react to a change in the level of activityB) whether a cost is incurred in a manufacturing, merchandising, or service companyC) classifying costs as either perpetual or period costsD) whether a particular expense is expensed in the same or the following periodAnswer: ADiff: 1Objective: 3AACSB: Analytical thinking4) Which of the following is true if the production volume decreases?A) fixed cost per unit increasesB) average cost per unit decreasesC) variable cost per unit increasesD) variable cost per unit decreasesAnswer: ADiff: 1Objective: 3AACSB: Application of knowledge5) At a plant where a union agreement sets annual salaries and conditions, annual labor costs usually________.A) are considered a variable costB) are considered a fixed costC) depend on the scheduling of floor workersD) depend on the scheduling of production runsAnswer: BDiff: 1Objective: 3AACSB: Analytical thinking6) Variable costs ________.A) are always indirect costsB) increase in total when the actual level of activity increasesC) include most personnel costs and depreciation on machineryD) are never considered a part of prime costAnswer: BDiff: 1Objective: 3AACSB: Analytical thinking7) Maize Plastics manufactures and sells 50 bottles per day. Fixed costs are $30,000 and the variable costs for manufacturing 50 bottles are $10,000. Each bottle is sold for $1,000. How would the daily profit be affected if the daily volume of sales drop by 10%?A) profits are reduced by $4,000B) profits are reduced by $1,000C) profits are reduced by $5,000D) profits are reduced by $6,000Answer: AExplanation: A) Variable cost per unit = $10,000 / 50 = $200Profit for 50 bottles = ($1,000 × 50) - ($30,000 + $10,000) = $10,000Sales after 10% drop = 50 × (1 - 0.10) = 45Profit for 45 bottles = ($1,000 × 45) - ($30,000 + (45 × 200))= $6,000Change in profit = $10,000 - $6,000 = $4,000. Hence, the profit has decreased by $4,000.Diff: 3Objective: 3AACSB: Application of knowledge8) Fixed costs depend on the ________.A) amount of resources usedB) amount of resources acquiredC) volume of productionD) total number of units soldAnswer: BDiff: 1Objective: 3AACSB: Analytical thinking9) Which one of the following is a variable cost for an insurance company?A) rent of the buildingB) CEO's salaryC) electricity expensesD) property taxesAnswer: CDiff: 1Objective: 3AACSB: Application of knowledge10) Which of the following is a fixed cost for an automobile manufacturing plant?A) administrative salariesB) electricity used by assembly-line machinesC) sales commissionsD) tiresAnswer: ADiff: 1Objective: 3AACSB: Application of knowledge11) If each motorcycle requires a belt that costs $20 and 2,000 motorcycles are produced for the month, the total cost for belts is ________.A) considered to be a direct fixed costB) considered to be a direct variable costC) considered to be an indirect fixed costD) considered to be an indirect variable costAnswer: BDiff: 1Objective: 3AACSB: Application of knowledge12) The most likely cost driver of distribution costs is the ________.A) number of parts within the productB) number of miles drivenC) number of products manufacturedD) number of production hoursAnswer: BDiff: 1Objective: 3AACSB: Application of knowledge13) The most likely cost driver of direct labor costs is the ________.A) number of machine setups for the productB) number of miles drivenC) number of production hoursD) number of machine hoursAnswer: CDiff: 1Objective: 3AACSB: Application of knowledge14) Which of the following statements is true?A) There is a cause-and-effect relationship between the cost driver and the amount of cost.B) Fixed costs have cost drivers over the short run.C) Over the short run all costs have cost drivers.D) Volume of production is a cost driver of distribution costs.Answer: ADiff: 1Objective: 3AACSB: Analytical thinking15) A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.A) average rangeB) cost-allocation rangeC) cost driver rangeD) relevant rangeAnswer: DDiff: 1Objective: 3AACSB: Analytical thinking16) Within the relevant range, if there is a change in the level of the cost driver, then ________.A) total fixed costs and total variable costs will changeB) total fixed costs and total variable costs will remain the sameC) total fixed costs will remain the same and total variable costs will changeD) total fixed costs will change and total variable costs will remain the sameAnswer: CDiff: 2Objective: 3AACSB: Analytical thinking17) Outside the relevant range, variable costs, such as direct material costs ________.A) will decrease proportionately with changes in sales volumesB) will remain the same with changes in production volumesC) will not change proportionately with changes in production volumesD) will increase proportionately with changes in sales volumesAnswer: CDiff: 2Objective: 3AACSB: Analytical thinking18) Which of the following is a cost driver for a company's human resource costs?A) the number of employees in the companyB) the number of job applications processedC) the number of units soldD) the square footage of the office space used by the human resource departmentAnswer: BDiff: 1Objective: 3AACSB: Analytical thinkingAnswer the following questions using the information below:Zephyr Apparels is a clothing retailer. Unit costs associated with one of its products, Product DCT121, are as follows:Direct materials $ 70Direct manufacturing labor 20Variable manufacturing overhead 15Fixed manufacturing overhead 32Sales commissions (2% of sales) 5Administrative salaries 16Total $15819) What are the direct variable manufacturing costs per unit associated with Product DCT121?A) $142B) $90C) $105D) $110Answer: CExplanation: C) Direct variable manufacturing costs = $70 + $20 + $15 = $105Diff: 1Objective: 3AACSB: Application of knowledge20) What are the indirect nonmanufacturing variable costs per unit associated with Product DCT121?A) $5B) $21C) $90D) $142Answer: AExplanation: A) Indirect variable costs = Sales commissions = $5Diff: 1Objective: 3AACSB: Application of knowledgeAnswer the following questions using the information below:The East Company manufactures several different products. Unit costs associated with Product ORD210 are as follows:Direct materials $54Direct manufacturing labor 8Variable manufacturing overhead 11Fixed manufacturing overhead 25Sales commissions (2% of sales) 5Administrative salaries 12Total $11521) What is the percentage of the total variable costs per unit associated with Product ORD105 with respect to total cost?A) 72%B) 68%C) 75%D) 70%Answer: AExplanation: A) $60 + $10 + $15 + $5 = $90/125 = 72%Diff: 3Objective: 3AACSB: Application of knowledge22) What is the percentage of the total fixed costs per unit associated with Product ORD105 with respect to total cost?A) 32%B) 28%C) 26%D) 20%Answer: BExplanation: B) $25 + 10 = $35/125 = 28%Diff: 3Objective: 3AACSB: Application of knowledge23) A fixed cost is fixed only in relation to a given wide range of total activity or volume and only for a giventime span, usually a particular budget period.Answer: TRUEDiff: 2Objective: 3AACSB: Application of knowledge24) A cost driver is a variable, such as the level of activity or volume that causally affects costs over a given time span.Answer: TRUEDiff: 1Objective: 3AACSB: Analytical thinking25) Fixed cost per unit reduces with an increase in production volume.Answer: TRUEDiff: 2Objective: 3AACSB: Analytical thinking26) Variable costs per unit vary with the level of production or sales volume.Answer: FALSEExplanation: Variable costs per unit are constant with the level of production or sales volume.Diff: 2Objective: 3AACSB: Analytical thinking27) Wood used to manufacture chairs is considered a direct variable cost.Answer: TRUEDiff: 1Objective: 3AACSB: Analytical thinking28) Variable costs depend on the resources used.Answer: FALSEDiff: 1Objective: 3AACSB: Analytical thinking29) A fixed cost remains unchanged in total for a given time period, despite wide changes in the related levelof total activity or volume of output produced.Answer: TRUEDiff: 1Objective: 3AACSB: Analytical thinking30) An appropriate cost driver for shipping costs might be the number of units shipped.Answer: TRUEDiff: 1Objective: 3AACSB: Analytical thinking31) Butler Hospital wants to estimate the cost for each patient stay. It is a general health care facility offering only basic services and not specialized services such as organ transplants.Required:a. Classify each of the following costs as either direct or indirect with respect to each patient.b. Classify each of the following costs as either fixed or variable with respect to hospital costs per day.Direct Indirect Fixed VariableElectronic monitoring ________ ________ ________ ________Meals for patients ________ ________ ________ ________Nurses' salaries ________ ________ ________ ________Parking maintenance ________ ________ ________ ________Security ________ ________ ________ ________Answer: Direct Indirect Fixed VariableElectronic monitoring X XMeals for patients X XNurses' salaries X XParking maintenance X XSecurity X XDiff: 3Objective: 2, 3AACSB: Application of knowledge32) The list of representative cost drivers in the right column below are randomized with respect to the list of functions in the left column. That is, they do not match.Required:Match each business function with its representative cost driver.Objective: 3AACSB: Application of knowledge33) Describe a variable cost. Describe a fixed cost. Explain why the distinction between variable and fixed costs is important in cost accounting.Answer: Total variable costs increase with increased production or sales volumes. Fixed costs are not influenced by fluctuations in production or sales volumes. However, variable cost per unit remains the same at all levels of production and fixed cost per unit reduces with increase in production. Without the knowledge of cost behaviors, budgets and other forecasting tools will be inaccurate and unreliable. Understanding whether a cost behaves as a variable or a fixed cost is essential to estimating and planning for business success.Diff: 3Objective: 3AACSB: Analytical thinkingObjective 2.41) A unit cost is computed by ________.A) multiplying total cost by the number of units producedB) dividing total cost by the number of units producedC) dividing variable cost by the number of units producedD) dividing fixed cost by the number of units producedAnswer: BDiff: 1Objective: 4AACSB: Analytical thinking2) In making product mix and pricing decisions, managers should focus on ________.A) total costsB) unit costsC) variable costsD) manufacturing costsAnswer: ADiff: 2Objective: 4AACSB: Analytical thinking3) When 20,000 units are produced, fixed costs are $16 per unit. Therefore, when 16,000 units are produced, fixed costs will ________.A) increase to $20 per unitB) remain at $16 per unitC) decrease to $10 per unitD) total $160,000Answer: AExplanation: A) Fixed costs are $320,000 ($16 × 20,000 units). Dividing $320,000 by 16,000 units = $20. Diff: 3Objective: 4AACSB: Application of knowledge4) When 20,000 units are produced, variable costs are $8 per unit. Therefore, when 10,000 units are produced ________.A) variable costs will remain at $8 per unitB) variable costs will total $60,000C) variable unit costs will increase to $12 per unitD) variable unit costs will decrease to $3 per unitAnswer: ADiff: 2Objective: 4AACSB: Application of knowledge5) Eigen Manufacturing Corp. provided the following information for last month:Sales $40,000Variable costs 14,000Fixed costs 10,000Operating income $16,000If sales reduce to half of the amount in the next month, what is the projected operating income?A) $15,000B) $6,000C) $16,000D) $3,000Answer: DExplanation: D) Projected operating income = ($40,000 / 2) −($14,000 / 2) − $10,000 = $3,000 Diff: 3Objective: 4AACSB: Application of knowledge6) Genosis Metals provided the following information for last month:Sales $20,000Variable costs 8,000Fixed costs 4,000Operating income $8,000If sales reduce to half the amount in the next month, what is the projected operating income?A) $0B) $4,000C) $2,000D) $6,000Answer: CExplanation: C) Projected operating income = ($20,000 × 0.5) − ($8,000 × 0.5) − $4,000 = $2,000 Diff: 3Objective: 4AACSB: Application of knowledge。

CHAPTER 2 QUIZ1.Tanner Co. management desires cost information regarding their Rawhide brand.The Rawhide brand is a(n)a.cost object.b.cost driver.c.cost assignment.d.actual cost.2.The cost of replacement light bulbs on campus would be a direct cost to a collegebut would need to be allocated as an indirect cost toa.departments.b.buildings.c.schools.d.individual student instruction.3.What is the total fixed cost of the shipping department of EZ-Mail Clothing Co. if ithas the following information for 2002?Salaries $800,000 75% of employees on guaranteedcontractsPackaging $400,000 depending on size of item(s) shippedPostage $500,000 depending on weight of item(s) shippedRent of warehouse space $250,000 annual leasea. $850,000b. $900,000c. $1,050,000d. $1,950,0004.Morton Graphics successfully bid on a job printing standard notebook covers duringthe year using last year’s price of $0.27 per cover. This amount was calculated from prior year costs, noting that no changes in any costs had occurred from the past year to the current year. At the end of the year, the company manager was shocked todiscover that the company had suffered a loss. ―How could this be?‖ she exclaimed.―We had no increases in cost and our price was the same as last year. La st year wehad a healthy income.‖ What could explain the company’s loss in income thiscurrent year?a.Their costs were all variable costs and the amount produced and soldincreased.b.Their costs were mostly fixed costs and the amount produced this year wasless than last year.c.They used a different cost object this year than the previous year.d.Their costs last year were actual costs but they used budgeted costs to maketheir bids.5.Which type of company converts materials into finished products?a.Not-for-profitb.Servicec.Merchandisingd.Manufacturing6.The three categories of inventories commonly found in many manufacturingcompanies are:a.Direct materials, direct labor, and indirect manufacturing costs.b.Purchased goods, period costs, and cost of goods sold.c.Direct materials, work in process, and finished goods.d.LIFO, FIFO, and weighted average.7.Inventoriable costs area.only purchased goods for resale.b. a category of costs used only for manufacturing companies.c.recorded as expenses when incurred and later reclassified as assets.d.recorded as assets when incurred.8.Period costs area.all costs in the income statement other than cost of goods sold.b.defined as manufacturing costs incurred this period on the schedule of costof goods manufactured.c.always recorded as assets when first incurred.d.those costs that benefit future periods.9.The cost of a product can be measured as any of the following except as costa.gathered from all areas of the value chain.b.identified as period cost.c.designated as manufacturing cost only.d.explicitly defined by contract.10.The primary focus of cost management is toa.help managers make different decisions.b.calculate product costs.c.aid managers in budgeting.d.distinguish between relevant and irrelevant information.CHAPTER 2 QUIZ SOLUTIONS1. a2. d3. a4. b5. d6. c7. d8. a9. b10. aQuiz Question Calculations3. Fixed costs = (800,000) 75% + 250,000 = $850,000CHAPTER 3 QUIZ1.Which of the following is not a factor in cost-volume-profit analysis?a.Units soldb.Selling pricec.Total variable costsd.Fixed costs of a product2.Which of the following is not an assumption of cost-volume-profit analysis?a.The time value of money is incorporated in the analysis.b.Costs can be classified into variable and fixed components.c.The behavior of revenues and expenses is accurately portrayed as linearover the relevant range.d.The number of output units is the only driver.3.Contribution margin is calculated asa.total revenue – total fixed costs.b.total revenue – total manufacturing costs (CGS).c.total revenue – total variable costs.d.operating income + total variable costs.Questions 4-6 are based on the following data.Tee Times, Inc. produces and sells the finest quality golf clubs in all of ClayCounty.The company expects the following revenues and costs in 2004 for its Elite Qualitygolf club sets:Revenues (400 sets sold @ $600 per set) $240,000Variable costs 160,000Fixed costs 50,0004.How many sets of clubs must be sold for Tee Times, Inc. to reach their breakeven point?a. 400b. 250c. 200d. 1505.How many sets of clubs must be sold to earn a target operating income of $90,000?a. 700b. 500c. 400d. 3006.What amount of sales must Tee Times, Inc. have to earn a target net income of $63,000if they have a tax rate of 30%?a. $489,000b. $429,000c. $420,000d. $300,0007.One way for managers to cope with uncertainty in profit planning is toe CVP analysis because it assumes certainty.b.recommend management hire a futurist whose work is to predict businesstrends.c.wait to see what does happen and prepare a report based on actual amounts.e sensitivity analysis to explore various what-if scenarios in order toanalyze changes in revenues or costs or quantities.8.The Beta Mu Omega Chi (BMOC) fraternity is looking to contract with a local band toperform at its annual mixer. If BMOC expects to sell 250 tickets to the mixer at $10each, which of the following arrangements with the band will be in the best interest ofthe fraternity?a.$2500 fixed feeb.$1000 fixed fee plus $5 per person attendingc.$10 per person attendingd.$25 per couple attendingUse the following information for questions 9 and 10.LSB Company has the following income statement:Revenues $100,000Variable Costs 40,000Contribution Margin 60,000Fixed Costs 30,000Operating Income 30,0009. What is LSB’s DOL?a. 3.33b. 2.00c.0.50d. 1.0010. If LSB’s sales increase by $20,000, what will be the company’s operating profit?a.$42,000b.$12,000c.$50,000d.$30,00011.Twin Products Company produces and sells two products. Product M sells for $12and has variable costs of $6. Product W sells for $15 and has variable costs of $10.Twin predicted sales of 25,000 units of M and 20,000 of W. Fixed costs are $60,000 per month. Assume that Twin achieved its sales goal of $600,000 for September,but fell short of its expected operating income of $190,000. Which of the following descriptions best describes the actual results reported of revenue of $600,000 andoperating income of less than $190,000?a.Twin sold 50,000 of M and no product W.b.Twin sold more of both products M and W than expected.c.Twin sold more of product W and less of product M than expected.d.Twin sold more of product M and less of product W than expected.12.In the situation of multiple cost drivers, CVP analysis cana.be modified so that the various simple formulas can be used by applyingthem separately to each cost driver.b.apply the same formulas as that used for a single-cost driver.c.be changed by incorporating all of the cost drivers into the breakevenformula to calculate the unique point of output at which the company wouldbreak even.d.be adapted by incorporating the cost drivers into the calculation of thevariable costs.13.Which of the following statements is true?a.Gross margin is another term for contribution margin.b.Contribution margin is acceptable for use in external financial statements.c.Contribution margin is used to help managers in decision making.d.Gross margin is revenues minus variable cost.CHAPTER 3 QUIZ SOLUTIONS1. c2. a3. c4. b5. a6. c7. d8. b9. b10. b11. c12. b13. cQuiz Question Calculations4. Variable costs per unit = $160,000/400 units sold = $400Contribution Margin = $600 – 400 = $200 per unitBreakeven point = $50,000/$200 = 250 units5. TOI = $50,000 + $90,000/$200 = 700 units6. TNI = $50,000 + $63,000/(1 – .30)/$200 = 700 units × $600 = $420,0001.Cost of option a: $2,500 Profit = 0Cost of option b: $1,000 + 5(250) = $2,250 Profit = $250Cost of option c: $10 (250) = $2,500 Profit = 0Cost of option d: $25 (125) = $3,125 Loss ($625)2.DOL = $60,000/$30,000 = 2.03.$20,000/ $100,000 = 20%20% × 2 = 40%40% × $30,000 = $12,000 increaseCHAPTER 4 QUIZ1. A cost-allocation base may be any of the following except aa.cost driver.b.cost pool.c.way to link indirect costs to a cost object.d.nonfinancial quantity.2. A company that manufactures dentures for use by local dentists would usea.process costing.b.personal costing.c.operations costing.d.job costing.3.The first step in the seven-step approach to job costing is toa.select the cost-allocation base to use in assigning indirect costs to the job.b.identify the direct costs of the job.c.identify the job that is the chosen cost object.d.identify the indirect-cost pools associated with the job.ing normal costing rather than actual costing requires that the allocating ofindirect manufacturing costs to work-in-process bea.done on a more timely basis, such as every two weeks rather than everymonth.b.journalized only at year end when adjusting entries are normally made.c.calculated by using the budgeted rate times actual quantity of allocationbase.d.calculated by using the budgeted rate times the budgeted quantity ofallocation base.5.Manufacturing Overhead Controla.represents actual overhead costs incurred.b.has a normal debit balance.c.is a control account with a subsidiary ledger detailing the components ofmanufacturing overhead.d.All of the above6.Which of the following accounts is not classified as an asset?a.Manufacturing Overhead Controlb.Materials Controlc.Work-in-Process Controld.Finished Goods Control7.The costs incurred on jobs that are currently in production but are not yet completewould appear in thea.Materials Control account.b.Finished Goods Control account.c.Manufacturing Overhead Control account.d.Work-in-Process Control account.8.The Precision Widget Company had the following balances in their accounts at theend of the accounting period:Work-in-Process $ 5,000Finished Goods 20,000Cost of Goods Sold 200,000If their manufacturing overhead was overallocated by $8,000 and Precision Widget adjusts their accounts using a proration based on total ending balances, the revisedending balance for Cost of Goods Sold would bea. $192,880.b. $200,00.c. $207,120.d. $208,000.9.Liberty Box Company calculated an indirect-cost rate of $12.50 per labor hour forfringe benefits for use in their normal costing system. At the end of the year, theactual cost of fringe benefits was $980,000. The total of labor hours worked for the year was the same amount as budgeted, 70,000 hours. If Job #640 required the useof 15 labor hours and the company used the adjusted allocation rate approach, bywhat amount would the cost of Job #640 change?a.$560.00b.$281.25c.$22.50d.$20.5010.If each professional in a service company is paid on an annual salary basis, whymight the firm want to use a predetermined or budgeted rate for direct orprofessional labor?a. A predetermined or budgeted rate is easier to justify to a client who mightquestion a billing rate.b.Professional staff persons do not keep accurate records of the jobs on whichthey work.c.Professional staff incurs more client costs, such as travel, lodging, and out-of-town meals, while working on a job.d.Year-end bonuses paid to the professional staff are difficult to trace toindividual jobs.CHAPTER 4 QUIZ SOLUTIONS1. b2. d3. c4. c5. d6. a7. d8. a9. c10. dQuiz Question CalculationsWork in Process $5,000 / 225,000 2.2% ⨯ $8,000 = 176Finished Goods $20,000 /225,000 8.9% ⨯ $8,000 = 712Cost of Goods Sold $200,000 / 225,000 88.9% ⨯ $8,000 = 7,120200,000 – 7,120 = $192,8809. 980.000/70,000 = $14.00 (actual rate)$14,000 – $12.50 = $1.50 excess of actual over budget1.50 ⨯ 15 hours – $22.50 additional costCHAPTER 5 QUIZ1.Production-cost cross-subsidization results froma.allocating indirect costs to multiple products.b.assigning traced costs to each product.c.assigning costs to different products using varied costing systems within thesame organization.d.assigning broadly averaged costs across multiple products withoutrecognizing amounts of resources used by which products.2.In refining a cost systema.total direct costs are unchanged because they can be traced in aneconomically feasible way to the product and traced costs are more accurate.b.the costs are grouped in homogeneous pools of the same or similar amounts.c.the criterion of cause and effect is used to relate indirect costs to a factorthat systematically links to a cost object.d.the organization looks for cost-allocation bases that will provide a uniformspreading of indirect costs to each product.Question 3 is based on the following data.The average cost data are for In-Sync Fixtures Company’s (a retailer) only twoproduct lines, Marblette and Italian Marble.Marblette Italian MarblePurchase volume 20,000 1,000Purchase cost per unit $50 $50Shipments received 12 12Hours used per shipment * 5 3 *These data were accumulated after a careful activity analysis.Currently, In-Sync Fixtures uses a traditional costing system with indirect costsallocated using purchased cost of goods as a basis. In-Sync Fixtures is consideringrefining the allocation of their receiving costs of $40,000. They realize that the ItalianMarble is heavier and requires more care than the Marblette but that the Marblettecomes in larger volume.3.Which statement can be made using the results of the activity analysis performed byIn-Sync Fixtures?a.The use of this refined activity-based costing system will increase theaccuracy of the resulting product costs because a more appropriate cost driverwill be used as the allocation base.b.The traditional allocation method currently being used is causing product-costcross-subsidization with the product line Marblette being undercosted.c.The cost allocated to the Italian Marble product line under the currenttraditional system is more than the activity-based costing allocated cost.d.The use of this refined activity-based costing system will increase theaccuracy of the resulting product costs because it probably will cost less totrace the costs to the product lines.4.Advertising of a specific product is an example ofa.unit-level costs.b.batch-level costs.c.product-sustaining costs.d.facility-sustaining costs.5.The allocation of indirect costs in an activity-based costing systema.may require other costs to be allocated to activities before the costs of theactivities can be allocated to the products.b.is simplified because more costs are identified as direct costs.c.requires the use of heterogeneous cost pools.d.is simplified because a limited number of activities are identified as costobjects.Information for questions 6 and 7 is given below.Jackson Enterprises manufactures two products—A basic gizmo and an advancedmodel gizmo. The company is using an activity-based costing system. They haveidentified three activities for allocation of indirect costs.Activity Cost Driver Cost-Allocation RateMaterials receiving Number of parts $2.00 per partProduction setup Number of setups $500.00 per setupQuality inspection Inspection time $90 per hourA production run for the basic model is 250 units, for the advanced model, 100 units.Each unit of product consumes the following activities:Number of Parts Number of Setups Inspection Time Basic Gizmo 10 50 10 minutesAdvanced Gizmo 15 25 20 minutesDirect costs for the two products are as follows:Direct Materials Direct LaborBasic Gizmo $50.00 $ 75.00Advanced Gizmo $95.00 $125.006.The amount of overhead allocated to one unit of the basic model would bea.$592.b.$37.c.$162.d.$65.7.The total cost of an advanced model would bea.$162.b.$65.c.$200.d.$265.8.Evaluating customer reaction of the trade-off of giving up some features of aproduct for a lower price would best fit which category of management decisionsunder activity-based management?a.Pricing and product-mix decisionsb. Cost reduction decisionsc. Design decisionsd. Discretionary decisions9.Which of the following statements is more representative of activity-based costingin comparison to a department-costing system?a.The use of multiple cost-allocation basesb.The use of indirect-cost rates for significant resource usec.The use of activities having a cause-and-effect relationshipd.The use of multiple cost pools10. A significant limitation of activity-based costing is thea.attention given to indirect cost allocation.b.many necessary calculations.c.operations staff’s attitude to ward the accounting staff.e it makes of technology.CHAPTER 5 QUIZ SOLUTIONS1. d2. c3. a4. c5. a6. b7. d8. c9. c10. bQuiz Question Calculations6. (2 ⨯10) + ($500/250) + ($90/60 ⨯ 10) = $377. $75 + $125 + ($2 ⨯ 15) + ($500/100) + ($90/60 ⨯ 20)CHAPTER 7 QUIZ1.[CMA Adapted] Flexible budgetsa.accommodate changes in the inflation rate.b.accommodate changes in activity levels.c.are used to evaluate capacity utilization.d.are static budgets that have been revised for changes in price(s).2.[CMA Adapted] The following information is available for the Gabriel ProductsCompany for the month of July:Static Budget Actual Units 5,000 5,100Sales revenue $60,000 $58,650Variable manufacturing costs $15,000 $16,320Fixed manufacturing costs $18,000 $17,000Variable marketing and administrative expense $10,000 $10,500Fixed marketing and administrative expense $12,000 $11,000The total sales-volume variance for the month of July would bea. $2,550 unfavorable.b. $1,350 unfavorable.c. $700 favorable.d. $100 favorable.3.[CMA Adapted] Bartholomew Corporation’s master budget calls for the production of6,000 units of product monthly. The master budget includes indirect labor of$396,000 annually; Bartholomew considers indirect labor to be a variable cost.During the month of September, 5,600 units of product were produced, and indirect labor costs of $30,970 were incurred. A performance report utilizing flexiblebudgeting would report a flexible budget variance for indirect labor ofa. $170 unfavorable.b. $170 favorable.c. $2,030 unfavorable.d. $2,030 favorable.4.Which of the following is not an advantage for using standard costs for varianceanalysis?a.Standards simplify product costing.b.Standards are developed using past costs and are available at a relativelylow cost.c.Standards are usually expressed on a per-unit basis.d.Standards can take into account expected changes planned to occur in thebudgeted period.rmation on Pruitt Company’s direct-material costs for the month of July 2005 wasas follows:Actual quantity purchased 30,000 unitsActual unit purchase price $2.75Materials purchase-price variance—unfavorable (based on purchases) $1,500Standard quantity allowed for actual production 24,000 unitsActual quantity used 22,000 units[CPA Adapted] For July 2005 there was a favorable direct-materials efficiencyvariance ofa. $7,950.b. $5,500.c. $5,400.d. $5,600.rmation for Garner Company’s direct-labor costs for the month of September 2005was as follows:Actual direct-labor hours 34,500 hoursStandard direct-labor hours 35,000 hoursTotal direct-labor payroll $241,500Direct-labor efficiency variance—favorable $ 3,200[CPA Adapted] What is Garner’s direct-labor price (or rate) variance?a. $21,000 favorableb. $21,000 unfavorablec. $17,250 unfavorabled. $20,700 unfavorable7.Performance evaluation using variance analysis should guard againsta.emphasis on a single performance measure.b.emphasis on total company objectives.c.basing effect of a manager’s action on total costs of the company as a whole.d.highlighting individual aspects of performance.8.The basic principles and concepts of variance analysis can be applied to activity-basedcostinga.by application as to the levels of cost hierarchy.b.through careful classification of costs as direct and indirect as applied to theproduct or job.c.with use of standard costing systems only.d.only through those activities related to individual units of product or service.9.Benchmarking isa.relatively easy to do with the amount of available financial informationabout companies.b.best done with the best in their field regardless of type of company.c.simply reporting the magnitude of differences in costs or revenues acrosscompanies.d.making comparisons to direct attention to why differences in costs existacross companies.CHAPTER 7 QUIZ SOLUTIONS1. b2. c3. a4. b5. c6. d7. a8. a9. dQuiz Question Calculations2. 5,100 – 5,000 = 100 units ⨯ $7* = $700FUnit CM = 60,000 – 15,000 –10,000/35,000 = $73. Actual DL $30,970Flexible budget 5,600 ⨯ $5.50 30,800Flexible budget variance 170 U5. Actual price 30,000 ⨯ 2.75 82,500Minus unfavorable price variance 1,500Materials at standard 81,00081,000/30,000 = $2.70 standard price per unitActual quantity 22,000 unitsStandard quantity 24,000 unitsEfficiency variance 2,000 ⨯ 1.70 = $5,400 F6. Actual direct labor cost $241,500Standard 34,500 ⨯ 6.40 $220,800Price variance 20.700 UStandard rate = 3,200/(35,000 – 34,500) = $6.40FLEXIBLE-BUDGET AND SALES-VOLUME VARIANCE ANALYSISActual Results: Flexible Budget: Static Budget:Actual Units Sold Actual Units Sold Budgeted Units SoldX Actual Sales Mix X Actual Sales Mix X Budgeted Sales MixX Actual CM/unit X Budgeted CM/unit X Budgeted CM/unit| - - - - Flexible budget variance - - - - | - - - - Sales-volume variance - - - - || - - - - - - - - - - - - - - - - - - - Static budget variance - - - - - -- - - - - - - - - - |SALES-MIX AND SALES-QUANTITY VARIANCE ANALYSISFlexible Budget: Static Budget:Actual Units Sold Actual Units Sold Budgeted Units SoldX Actual Sales Mix X Budgeted Sales Mix X Budgeted Sales MixX Budgeted CM/unit X Budgeted CM/unit X Budgeted CM/unit| - - - - - - Sales mix variance - - - - - | - - - - Sales-quantity variance - - - - || - - - - - - - - - - - - - - - - - - - Sales-volume variance - - - - - - - - - - - - - - - |MARKET-SHARE AND MARKET-SIZE VARIANCE ANALYSISFlexible Budget: Static Budget:Actual Market Size Actual Market Size Budgeted Market SizeX Actual Market Share X Budgeted Market Share X Budgeted Market Share X Budgeted CM/unit X Budgeted CM/unit X Budgeted CM/unit| - - - - - - Market share variance - - - - - | - - - - Market size variance - - - - || - - - - - - - - - - - - - - - - - - - Sales-quantity variance - - - - - - - - - - - - - - - |INPUT PRICE AND EFFICIENCY VARIANCESActual Costs: Flexible Budget: Actual Input Actual Input Budgeted Input (for actual output)X Actual Price X Budgeted Price X Budgeted Price| - - - - - - - Price variance - - - - - - - | - - - - - - - Efficiency variance - - - - - - - || - - - - - - - - - - - - - - - - - - - Flexible budget variance - - - - - -- - - - - - ----- - - - |INPUT YIELD AND MIX VARIANCESActual Input/Actual Mix : Flexible Budget:Actual Inputs Used Actual Input Used Budgeted Input (for actual output)X Actual Input Mix X Budgeted Input Mix X Budgeted Input MixX Budgeted Price X Budgeted Price X Budgeted Price| - - - - - - - - Mix variance - - - - - - - - | - - - - - - - - - Yield variance - - - - - - - || - - - - - - - - - - - - - - - - - - - Efficiency variance - - - - - - - - - - - - - - - - - - - - |。

成本核算的详细说明Cost accounting Detailedexplanation.Cost accounting refers to a branch of accounting and it is used by business organisations for ages. This particular branch of accounting is the best way for every kind of non-profit and profit making organisations to track their costs and the activities for which such costs are incurred by them.Cost accounting uses to deal with the evaluation of the cost of a product or service a company offered. It computes the cost of a product or service by considering every factor contributing to the process of producing such product orservice which include the factor related to manufacturing or production and administrative.Cost accounting system is aimed to help a company’s management to fix up the final price of a product or service it produces and to control the cost associated with the production of such product or service. Moreover, it pinpoints every sort of wastage, defects, and leakages during a company’s manufacturing process as well as its marketing processes.Cost accounting is a highly significant and advantageous companion of traditional financial accounting system. This accounting system involves the establishment of actual cost or standard cost of operations, different types of budgets along with classification, recording, and allocation of business related expenditure.OriginBefore the emergence of industrial revolution, business organisations were small in size and they are characterized by simple exchanges between organizations and individuals. In that period of time, accurate bookkeeping was needed but cost accounting was not so much vital. Over the years businesses become complex due to their distinct operating activities which evoked the need for cost accounting.The industrial revolution age has resulted in the development of large scale organisations and businesses and these organisations were much dynamic and complex than previous. Such dynamic and complex nature of businessesinstigated the invention of a new brand of accounting which is called cost accounting.So the concept of cost accounting originated and evolved due to the industrial revolution to help businessmen to track their business related expenses and costs by keeping a record for the same. Prior to the golden era of industrialization, costs and expenses of a business are categorized as variable costs which include cost of material, labor, overhead and other variable costs.However, at the time when industrialization came into existence, businesses had a number of‘fixed costs’ t hat are not directly associated with the manufacturing or production of products orservices. These fixed costs consist of expenses related to rent, storage costs, depreciation, insurance cost and more. As steel industry, railroads and some other large industries were developed, the understanding of the fixed costs of businesses became vital.Allocation of these fixed costs became significant to the business owners and managers for their business oriented decision making, product development, and pricing. Such increasing importance of understanding fixed costs, allocating the same in an appropriate manner, and considering these cost elements in decision making have originated the concept of modern cost accounting.EvolutionIn today’s world, the business env ironment becomes very dynamic as well as complex. A company must have the ability to navigate the complex business factors that arise from the external business environment as the threat of new entrants, competition, uncertainty, risks, and some other uncontrollable external factors. All these external business environment factors create complexities and difficulties for companies to continue their business operations smoothly and to expand their business.Before the industrial revolution, when the organisations were small in size and scale, the external business environment was not that much complex as it is now. In order to conduct business operation successfully by mitigating all the complex external factors effectively, the modern business organisations require lots ofprocesses and input which invoked the idea of cost accounting to come into existence.Over the times and as per the increasing complexities in business activities, only conventional financial accounting becomes insufficient for effective management of large and medium scale organisations. The need for improving the management system and business activities of large and medium size companies has provoked the evolution of cost accounting system. In the past few decades, this newly evolved branch of accounting has come through rapid growth and evolution in the present business world.A number of new techniques and procedures were developed in order to refine the cost accounting system and to make it most usefulfor companies. The main idea behind the development of cost accounting system was to refuse the backlogs of the conventional accounting system i.e. financial accounting system. Financial accounting is not able to enhance a company’s efficiency and cost control system. Thus, for enhancing operational efficiency of companies, and improving their cost control mechanism cost accounting system developed. With time some scientific methods and standards are formulated to increase the effectiveness and usefulness of cost accounting system.Definition and ObjectivesCost accounting is an accounting process which is for recording all types of costs incurred by a company or organisation for conducting theirbusiness operations in such a way which can assist in improving its management. It is a process of collecting, classifying, recording, analysing, summarising, and then, allocation of costs those areassociated with the operational processes of an organisation, and then developing a set of actions for controlling those costs.It is a method of accounting that aims towards capturing the costs of a company’s production process by assessing the input costs related to each step of the company’s production process and fixed costs like depreciation of tangible assets, amortisation of intangible assets. With the application of cost accounting mechanism, a company become able to measure different types of costs first and then record them individually and after that compare between theinput and output (actual) results to aid its management to measure its financial performance.This particular accounting concept is involved with the determination of costs of production (products), processes, projects, and more for reporting the same in the financial statements of a company with correct amounts. It also involved in assisting a company’s management in its planning and controlling and preparing specific and relevant financial analyses which assist in decision making in the best manner.A vital part of this accounting system involves unit cost of products for reporting the COGS (cost of goods sold) of the manufacturer’s income statement and inventory cost in the balance sheet. Cost accounting uses to assistmanagement to set business plans as well as to control the entire business through preparing budgets for operations, transfer pricing, standard costing, and reporting on variance, etc.It also helps the management in preparing capital budget for the company in relation to business expansion. It includes some special analyses like cost behaviour analysis, CVP (cost-volume-profit) analysis, decisions related to make or buy, final selling prices of products, and more. The root of cost accounting system is found in manufacturing companies though it has extended its arms to service providing companies also.For instance, a bank uses cost accounting for determining the processing cost associated with its customers’ deposits and/or checks, cost ofmaintaining the account, servicing costs related to mortgage loans, processing cost for international or domestic fund transfers and more. This, in turn, provides guidance to the management of the bank in setting the proper price for the various services it provides to the customers or clients.The objectives of the cost accounting system are to ascertain per unit cost of different types of products a manufacturing company uses to manufacture, to provide correct cost analysis of business operations along with different cost elements in relation to the regular operating activities of a business concern. It is also aimed to disclose the sources of production related wastages such as wastage of raw materials, time, and fund.All the production and distribution related wastages from raw material purchase to placing the final product to market are required to be analysed by every manufacturing company and cost accounting system is the best option to do so. Another objective of cost accounting system is to provide requisite data and information to the management of a company as guidance to set the best possible price for the final product.Furthermore, this particular accounting system’s another objective is to ascertain profitability attached to each product and service produced by a company and advise the management regarding the way to maximise such profitability.Advantages of cost accountingThe process of cost accounting led a company to collect and interpret information for determining how it earns and utilizes funds while conducting its regular business operations. This accounting system provides lots of actionable information in comparison to the financial accounting system. The advantages a company uses to get for using cost accounting system are as follows:Advantages of Cost AccountingHelpful in price fixationIn some cases, a company is capable of fixing up the final price for the products it tends to sell in the market as per the cost incurred for producing such products. Here, it becomes difficult to fix a product’s final price properly if proper cost figures are unavailable. If the final price of aproduct is fixed without using proper costing information, then quoted or final price of such product might be too low or high compared to the actual production cost of that product.If the final price of a product stands higher than the production cost then a company losses its customers and of it stands lower than production cost then the company faces loss. Cost accounting system reveals the exact price to be charged from customers that would be profitable for the manufacturing company. Manufacturing companies using cost accounting system used to get accurate information about the costs incurred for manufacturing a product or service they deliver to customers.Detect profitable as well as unprofitable business activitiesThis accounting systemdetects profit generating business activities that are required to be continued by a company to stay profitable in the market. Besides this, it also detects the unprofitable or loss making business activities of a company that is responsible for creating negative pressure on the company’s profitability and helps the management to eliminate such activities.Guide in price reductionIn some situations like slump or depression, it becomes very important for a company to reduce the final price of its products, even below the products’ actual tot al cost. In this situation, properly ascertained costs guide the management of a company to reduce the final price of products to cope up with the situationAdaptable in natureManagers use to appreciate the cost accounting system because it is easy to adapt, and implemented in accordance with the changing needs and demands of a business. Unlike the static financial accounting system, driven by the Financial Accounting Standards Board (FASB), the cost accounting system is only concerned with internal purposes and internal eyes of a company’s management board.Assist in proper planning and decision makingCost accounting system helps the management to set financial budgets, conduct variance analysis both of which are very important for making proper business plans. It facilitates the management by providing them detailed information regarding available labour and machine capacity and in this way it helps insetting proper work plan so that no department remains idle or no one is overworked. It assists in preparing annual financial budget and capital budget which are very significant for proper fund allocation and business expansion. It guides management to make decisions regarding the use of labour and machine for production by indicating the profitability of using both of these of any one of these for productionAssist in controlling expenditureCost accounting is useful for controlling expenditure as it helps to measure every single cost related to production and detects excess expenditure. By indicating the unprofitable business activities this system of accounting helps management to eliminate those actions or modify the same to transform it into profitable actions. Timely detection ofunprofitable activities helps to control overall cost of production from getting increased.Ease labour costs monitoring and controllingLabour costs of a company are easy to monitor as well as control if a company applies cost accounting system. Proper monitoring and controlling of labour costs assist the management to determine productivity and efficiency of a company’s labour force which is important while estimating marginal productivity of each employee. It also helps management to make decision on how to enhance individual labour productivity to increase the overall productivity of a company.Disadvantages of Cost AccountingAlongside the various advantages of cost accounting system there are some disadvantages of using this accounting system. The limitations of cost accounting system are given below:Lack of uniformity: This particular accounting system does not include a uniform process. It often makes different cost accountants to generate separate results from the same data and information. Due to such limitation, the results of cost accounting are used as estimates only.Costly: For small and medium scale business organisations, the application of cost accounting system is costly as it needs a completely separate set up for accounting. For large companies, this accounting system is not hard to implement but it puts negative pressure on their plex: This accounting system is quitecomplex to apply in comparison to financial accounting system as it requires lots of work on the front end, along with some constant adjustments for improvements. Segregation of different types of cost elements by considering their nature is also responsible for making this system complex than other accounting systems.Reliance on experienced and highly-skilled professionals: The application of cost accounting system requires highly-skilled professional accountants and auditors. It creates dependency on the cost accountants heavily and led a company to bear extra cost for hiring cost accountants. After the implementation of cost accounting system, employees required to get extra training as well as must gain the capability to cooperate with the data input sufficiently. Non-cooperation of employees found responsible for rendering ineffective costaccounting system which is otherwise found as a beautifully constructed accounting system.What is cost accounting?Impact of Cost Accounting on a Company’s SuccessCost accounting system helps a company to control its all kind of cost associated with production and marketing of products or services it delivers. Every organisation aims to reduce its operating costs to increase its profitability and cost reduction is one of the main targets to fulfil by the organisations to stay in the market profitably. The more a company becomes able to control its costs the great it becomes able to invest in innovation and modification of products and in other activities such as marketing and business expansion. Theinformation and data provided by cost accounting system include all types of costs associated with manufacturing a product or delivering a service. Such information is utilized by a company’s management while making decisions on pricing, budgeting, product mix, and others to support a company’s operational and financial objectives. Cost accounting significantly helps a company to control its business expenditure. It assists management of a company to set operational and capital budgets which help to make long-term strategic decisions to achieve long-term organisational goals in a successful manner.。