Final Assessment

Managerial Accounting

Name: Muhammad Rauf Mughal.

SID: 9428.
Course ID: 103878.
Faculty: Sir Humayun Fareed.

5/19/2020
Answer of Question no. 1 (Parts “a”, “b” & “c”)
Cost Accounting System:
The Framework used by the Organizations to evaluate Production Costs, doing Profitability
Analysis and Inventory Valuations, is known as The Cost Accounting System of any
Organization.
Benefits of Cost Accounting System:

There are following benefits of Cost Accounting System to any Organization:

 Assists the management in disclosure profitable and unprofitable activities.
 It provides necessary guidance to management for future production policies.
 It helps the management in periodical determination of profits and losses.
 It assists the management in finding out the exact cause of profits and losses.
 It exerts control over material and supplies.
 It helps in determining the exact selling price for any product.
 It also helps in budgeting and inventory valuation.

Nature of Costs:
Fixed Cost decreases with the increase in Units Produced and vice versa whereas The Variable
Cost increases with the increase in Units Produced.

Behavior of Costs:
Fixed Cost remains the same for all the produced units and no. of performed activities whereas
The Variable Cost changes for the produced units and no. of activities performed. However,
Fixed Cost per unit is variable as it changes and Variable Cost per Unit is Fixed as it remains the
same.

Uses of Costs:
Following are the uses of Costs:
 Costs provide mechanisms to set price and evaluate profit regarding a product.
 Costing Information is useful in determining the performance of The Manager.
 Data derived from Fixed and Variable Costs is helpful in determining the Unit Costs of
the Products manufactured by an Organization.

Determination of Product Cost to Evaluate Profit Planning and Pricing:

It is necessary to evaluate a product’s cost first-hand before going for estimating profits or the
selling price because you can’t determine the selling price and plan your profit if you don’t know
you much cost you have incurred in the manufacturing of that product. After you have computed
your total costs, only then you can set the market price of the product and can also plan on what
percentage of profit you aim for regarding a product.
 Answer of Question no. 3

Evaluation:

The method of annualized equivalent gives assumptions that company replaces assets with the
same assets each time. This is somehow ignores technological changes requirements which are
necessary for the asset replacement with the upgraded models which is somehow have more
functionally rich and well-organized. This method has also ignores the inflectional effect which
might be different for the rest of others variables. It means that optimal replacement period will
fluctuate over time. The company might not able to forecast the situations or environment for
future because the external environment is tend to be uncertain. It’s not being needed to be
replacing the assets in the future because they might not require in future.

Question no. 4 Solution

Answer of Question no. 6 (Parts “a” & “b”)
Answer of Question no. 7
Answer of Question no. 8
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