EXERCISES

1. Define Cost Accounting. Distinguish between Cost-Accounting (set budget, helps in decision
making))tad Financial Accounting( focus in position) .
-Cost accounting is a specialized branch of accounting which involves classification,
accumulation, analysis and control of cost.It provides an explanation of how much it costs to
produce a good or a service, both overall and for each individual component. While financial
accounting presents companies financial position and performance to external sources through
financial statement.
-information that accountant analize
-help management
-profitable or not

2. Describe the main purposes of cost accounting.

- The main purpose of cost accounting is to supply management with data for effective
planning, control, decision-making, and operation.

3. Explain the important conditions for effective costing system.

-The costing system used by a given organization must be appropriate for its size, industry, and
information requirements. The company must be able to afford the costing system, and it
should provide benefits that outweigh the cost of setup and maintenance.
The system needs to be more adaptable in order to handle the organization's changing
information needs and business conditions.

4. Write a short note on the need for cost accounts.

-In order to create company policies, management uses cost accounting to predict the cost and
selling price of a good or service.

5. What do you mean by factory organization? Draw an organization chart of a manufacturing

organization.
-The primary focus of factory organization is on the relationships between the many
components of the production, such as people roles, machine layout and grouping, and
material management.

6. Explain the difference between costing and cost accounting.

-Costing is the process of calculating the price. It is a method used in business organizations to
determine the cost of producing any good or service. Cost accounting is the next stage after
costing.

7.Write a short note on cost accumulation.

-It is a procedure of gathering all cost data for the company with the use of a cost accounting
system.

8. Write short notes on the following:

(a) cost unit-This implies any measurable product or service item for which expenses are
calculated. It serves as the basis for categorizing expenditures.
(b) cost centre-refers to a division or any area of the organization where expenses are incurred
but where direct revenue contribution is not made.
(c)profit centre.-a branch or division of a company that directly adds or is expected to add to the
entire organization's bottom line.