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1. Define cost accounting and explain its primary purpose in a business.
Answer:
Cost accounting is the process of tracking, recording, and analyzing costs associated
with the products or activities of a business. Its primary purpose is to help
management make informed decisions by providing detailed cost information,
facilitating cost control, and enhancing operational efficiency.
2. What are the main differences between fixed costs, variable costs, and mixed costs?
Provide examples of each.
Answer:
Fixed Costs: These costs remain constant regardless of the level of production
(e.g., rent, salaries).
Variable Costs: These costs change in direct proportion to the level of
production (e.g., raw materials).
Mixed Costs: These costs have both fixed and variable components (e.g.,
utility bills with a base charge and a usage-based charge).
3. Explain the concept of marginal costing and its significance in decision-making.
Answer:
Marginal costing is a technique that considers only variable costs while calculating
the cost of a product or decision. It is significant because it helps managers focus on
the additional costs incurred by producing one more unit and aids in pricing,
profitability, and decision-making.
4. What are cost drivers, and why are they essential in activity-based costing?
Answer:
Cost drivers are the factors that cause changes in the cost of an activity. They are
essential in activity-based costing because they help allocate costs more accurately to
products or services based on the actual consumption of activities.
5. Differentiate between job costing and process costing systems.
Answer:
, 2
1. Define cost accounting and explain its primary purpose in a business.
Answer:
Cost accounting is the process of tracking, recording, and analyzing costs associated
with the products or activities of a business. Its primary purpose is to help
management make informed decisions by providing detailed cost information,
facilitating cost control, and enhancing operational efficiency.
2. What are the main differences between fixed costs, variable costs, and mixed costs?
Provide examples of each.
Answer:
Fixed Costs: These costs remain constant regardless of the level of production
(e.g., rent, salaries).
Variable Costs: These costs change in direct proportion to the level of
production (e.g., raw materials).
Mixed Costs: These costs have both fixed and variable components (e.g.,
utility bills with a base charge and a usage-based charge).
3. Explain the concept of marginal costing and its significance in decision-making.
Answer:
Marginal costing is a technique that considers only variable costs while calculating
the cost of a product or decision. It is significant because it helps managers focus on
the additional costs incurred by producing one more unit and aids in pricing,
profitability, and decision-making.
4. What are cost drivers, and why are they essential in activity-based costing?
Answer:
Cost drivers are the factors that cause changes in the cost of an activity. They are
essential in activity-based costing because they help allocate costs more accurately to
products or services based on the actual consumption of activities.
5. Differentiate between job costing and process costing systems.
Answer:
