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Unformatted text preview: CHAPTER 1 QUESTIONS 1. The function of cost accounting is to provide the cost data which are the basis for plan- ning and controlling current and future oper- ations. It provides the cost figures and ana- lyses that management needs in order to find the most efficient methods of operating, achieving control of costs, and determining selling prices. 2. ISO 9000 is a set of five international stand- ards for quality. Obtaining ISO 9000 is im- portant because many companies will only contract with ISO 9000 suppliers. 3. Manufacturers convert purchased materials into finished goods by using labor, techno- logy, and facilities. Merchandisers purchase completed products for resale. Service busi- nesses or agencies sell or provide services rather than products. 4. A manufacturer differs from a merchandiser in these ways: a. The merchandiser buys items to sell while the manufacturing business must make the items it markets. b. Usually the manufacturer has a greater investment in physical facilities. c. The manufacturer will incur some costs peculiar to this type of industry, such as machine maintenance, materials hand- ling, and inspection of manufactured goods. The two types of operations are similar in that they are both concerned with purchas- ing, storing, and selling goods; they must have efficient management and adequate sources of capital; and they may employ many workers. 5. Cost accounting data are used by manage- ment in the following ways: a. Determining product costs which are ne- cessary for: determining cost of goods sold and valuing inventories; determin- ing product selling price; meeting com- petition; bidding on contracts; and ana- lyzing profitability. b. Planning by providing historical costs that serve as a basis for projecting data. c. Controlling operations by providing cost data that enable management to period- ically measure results, to take corrective action where necessary, and to search for ways to reduce costs. 6. Unit cost information is important to man- agement because the unit costs of one peri- od can be compared with those of other periods, and significant trends can be identi- fied and analyzed. Unit costs are also used in making important marketing decisions re- lated to selling prices, competition, bidding, and profitability analysis. 7. For a manufacturer, the planning process in- volves the selection of clearly defined ob- jectives of the manufacturing operation and the development of a detailed program to guide the organization in reaching the ob- jectives. Cost accounting provides historical cost data that are used as the basis for plan- ning future operations. 8. In a manufacturing concern, effective control is achieved in the following ways: a. Responsibility must be assigned for each detail of the master production plan....
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This note was uploaded on 10/16/2011 for the course ACCT ACTN taught by Professor Vanderbeck during the Spring '11 term at Abu Dhabi University.
- Spring '11
- Cost Accounting