Exercise 2.10 Cost Accounting Information System The following items are associa

Question

Exercise 2.10 Cost Accounting Information System The following items are associated with a cost accounting information system a. Usage of direct materials b. Assignment of direct materials cost to each product c. Direct labor cost incurrence d. Depreciation on production equipment e. Cost accounting personnel f. Submission of a bid, using product cost plus 25 percent g. Power cost incurrence h. Materials handling cost incurrence i. Computer j. Assignment of direct labor costs to products k. Costing out of products 1. Decision to continue making a part rather than buying it m. Printer n. Report detailing individual product costs o. Assignment of overhead costs to individual products OBJEC Required: 1. Classify the preceding items into one of the following categories: a. Interrelated parts b. Processes c. Objectives d. Inputs e. Outputs f. User actions Draw an operational model that illustrates the cost accounting information system-with the preceding items used as examples for each component of the model. 2. 3. Based on your operational model, identify which product cost definition is being used: value-chain, operating, or product (manufacturing)

Explanation / Answer

1...Cost accounting is the process of recording, classifying, analyzing, summarizing, and allocating costs associated with a process, and then developing various courses of action to control the costs. Its goal is to advise the management on how to optimize business practices and processes based on cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.

Since managers are making decisions only for their own organization, there is no need for the information to be comparable to similar information from other organizations. Instead, information must be relevant for a particular environment. Cost accounting information is commonly used in financial accounting information, but its primary function is for use by managers to facilitate making decisicions

2...The following are different cost accounting approaches:

3.Basic cost elements are:

These categories are flexible and sometimes overlapping. For example, in some companies, machine cost is segregated from overhead and reported as a separate element altogether, and payroll costs are sometimes separated form other production cost 3.Classification of cost means, the grouping of costs according to their common characteristics. The important ways of classification of costs are:

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