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12. What is the purpose of cost accounting?
The purposes of cost accounting require classifications of costs so that they
are recognized:
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by the nature of the item (a natural classification)
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in their relation to the product
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with respect to the accounting period to which they apply
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in their tendency to vary with volume or activity
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in their relation to departments
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for control and analysis
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for planning and decision-making.
13. What are the various methods for calculating the cost?
There are two methods for calculating the cost:
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Job-Order Cost Method: This method is used when orders are placed in the
factory for specific jobs or lots of product, which can be identified through
all manufacturing processes, a job cost system is appropriate.
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Process Cost Method: This product is used when production proceeds in a
continuous flow, when units of product are not separately identifiable, and
when there are no specific jobs or lots of product, a process cost system is
appropriate.
14. What is the purpose of departmental classification?
Departmental classification is required for:
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the segregation of different processes of production
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securing the smoothest possible flow of production
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establishing lines of responsibility for control over production and costs
15. What are the three managerial functions? Explain.
To achieve the objective three managerial functions should be kept in mind:
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Planning and setting objectives: It is a basic function of the management
process. Without planning, there is no need to organize or control. However,
planning must precede doing, and the budget is the most important planning tool
of an enterprise.
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Organizing: It is essentially the establishment of the framework within which
the required activities are to be performed, together with a list of who should
perform them. Creation of an organization requires the establishment of
organizational or functional units generally known as departments, divisions,
sections, floors, branches, etc.
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Controlling: is the process or procedure by which management ensures operative
performance, which corresponds with plans.
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