Question 1

What is the definition of costing?

Accepted Answer

Costing refers to analyzing all production costs, including variable and fixed costs, at every stage. It’s used internally to assess the total cost of production but is not shared outside the organization.

Question 2

What is the cost accounting method?

Accepted Answer

The cost accounting method helps businesses track costs, manage inventory, and measure profitability. Unlike general accounting, it’s flexible and tailored to a company’s needs but can be complex and expensive to maintain.

Question 3

What are the main advantages of cost accounting?

Accepted Answer

Cost accounting aids in cost control helps set pricing strategies, improves decision-making, and evaluates performance. It also provides detailed insights into production efficiency, helping businesses enhance profitability.

Question 4

What is an example of cost accounting?

Accepted Answer

A furniture company calculating the cost of a chair, including wood, labour, and overhead, to determine its selling price and profit margin, is an example of cost accounting in action.

Question 5

Who uses cost accounting?

Accepted Answer

Cost accounting is mainly used by a company’s internal management team. It helps managers plan budgets, control costs, and make informed decisions about production, pricing, and efficiency.

Functions of Cost Accounting

What is Cost Accounting? Definition, Types and Advantages