Assignment

1. Cost accounting is a tool of managerial planning & control. Explain.

Ans: Cost accounting provides information about costs, which the management accountant uses to plan, control and make decisions. Cost accounting therefore provides the basis for management accounting. Cost and management accounting formulate a management information system, which assists management in the task of planning, controlling and decision-making.

In the recent past, cost accounting was limited to the tools used to calculate an inventory cost for balance sheet presentation and to calculate the cost of goods sold for the income statement. Today, cost accounting is much more than an inventory cost tracking system. Today cost accounting involves determining the costs of products and activities also, but apart from it has a broader role: to furnish information used in planning and controlling activities, in improving quality and efficiency, and in formulating strategic policy. Therefore, cost accounting can help the management achieve the following:

1. Formulating and implementing plans and budgets that motivate employees towards the achievement of company goals.

2. Establishing cost racking methods that allow control of operations, cost savings and improvements in quality.

3. Controlling inventory cost, minimizing inventory investment and determining the cost of each product or service.

4. Pricing products and services in ways that are congruent with organizational goals.

5. Making prudent decisions that impact both short-term and long-term revenues and expenses.

2. How does the cost accounting function assist in the management of a business?

Ans: The following are the important functions of Cost Accounting:

• Ascertainment of cost of product: Cost Accounting ascertains cost of production of each job, process, or work order by applying different methods of cost accounting, such as job costing, process operation costing, contract costing etc. according to the...