Page 25 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting

Notes 1.10 Keywords

Cost: Expense incurred at the either cost centre or service centre.

Cost Centre: The location at where the cost of the activity is ascertained.
Cost of Production: It is the combination of cost of manufacturing an article or a product and
administrative cost.

Cost of Sales: It is the entire cost of a product.
Cost Sheet: It is a statement prepared for the computation of cost of a product/service.
Direct Cost: cost incurred which can be easily ascertained and measured for a product.
Factory Cost: It is the total cost incurred both direct and indirect at the work spot during the
production of an article.
Indirect Cost: Cost incurred cannot be easily ascertained and measured for a product.
Product Centre: It is the location at where the cost is ascertained through which the product is
passed through.
Profi t Centre: It is responsibility centre not only for the cost and revenues but also for profi ts for
the activity.

1.11 Review Questions

1. The cost accounting system is directly concerned with control of inventories, plant assets
and funds expanded on functional activities. Discuss.
2. Is there any difference between cost accounting and fi nancial accounting?
3. How will you visualize the costs of poor product quality, rework, repair, etc.?

4. Illustrate indirect and direct expenses with the help of suitable examples.
5. Once standard costs are established, what conditions would require the standards to be
revised? Give your opinion.

6. What is cost classification? Classify it, in detail.
7. Illustrate the different types of cots with suitable examples.

8. Briefly write a note on key elements of cost.
9. How will you determine the scope of cost accounting?
10. Critically evaluate the relationship between cost accounting and fi nancial accounting.

11. Process costing is most appropriate in circumstances where multi-phase mass production
is the underlying process of production. Why?

Answers: Self Assessment

1. False 2. True
3. True 4. Cost control

5. cost audit 6. Budgeting
7. True 8. False
9. False 10. cost reduction

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