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AEREN
FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
Name
: Mary Jennifer.A Marks
: 80
Course
: Bachelors in Management Studies (BMS)
Subject
: Financial and Cost Accounting
Answer
the following question.
Question.
1. What
one the limitations of financial accounting? How do you overcome item in cost
accounting? (10 marks)
Answer:
The limitations of financial statements are those factors that a user should be
aware of before relying on them to an excessive extent. Knowledge of these
factors could result in a reduction of invested funds in a business, or actions
taken to investigate further.
The
following are all limitations of financial statements:
· Dependence
on historical costs. Transactions are
Question.
2. Define
costing. How does it differ from financial accounting? Explain its importance
under present circumstances. (10 marks)
Answer:
In accounting terms, costing refers to a system of calculating the amount of
money it takes to produce goods or operate a business. Generally, costs include
variables like cost of labor, cost of materials, cost of distribution and
selling, taxes and administrative costs.
It
is important that managers figure out the manufacturing cost of a product
before it goes into the production stage, according to Ohio State University.
Establishing product costs helps in determining the selling price and
break-even point of goods. This system of determining costs also helps
companies set the profit margin percentage on goods
Question.
3. Define
costing critically evaluate the arguments for the installation of costing
system in an industry. (10 marks)
Answer:
Full costing is a managerial accounting method that describes when all fixed
and variable costs, including manufacturing costs, are used to compute the
total cost per unit. Full costing includes these costs when computing the
amount of money it takes to produce and distribute one unit of output.
How
a firm expenses its production and distribution costs will impact the structure
of internal income statements. Because all costs incurred to sell a product are
included with cost of goods sold, the firm's gross margin will be lower under
the full costing method than the absorption costing method.
Activity-based
costing (ABC) is a
Question.
4. Define
cost accounting. How does a good system of cost accounting serve the
management. (10 marks)
Answer:
Cost accounting is a process of collecting, recording, classifying, analyzing,
summarizing, allocating and evaluating various alternative courses of action
& control of costs. Its goal is to advise the management on the most
appropriate course of action based on the 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
Question.
5. What
do you mean by installation of costing system? Explain the practical
difficulties involved in installing such a system in a manufacturing concern. (10
marks)
Answer:
The installation of a costing system requires careful consideration of the
following two interrelated aspects:
·
Overcoming the practical difficulties while
introducing a system
·
Main considerations that should govern the
installation of such a system
Practical
Difficulties: The important difficulties in the installation of a costing
system and the suggestions to overcome them are as follows:
a.
Lack of Support from Top Management: Often, the costing system is
introduced at the behest of the managing director or some other director
without taking into confidence other members of the top management team. This
results in opposition from various managers as they consider it interference as
well as an uncalled check of their activities. They,
Question.
6.
Explain the advantages of cost accounting. (10 marks)
Answer:
The advantages of cost accounting are:
Disclosure
of profitable and unprofitable activities: Since cost accounting minutely
calculates the cost, selling price and profitability of product, segregation of
profitable or unprofitable items or activities becomes easy.
Guidance
for future production policies: On the basis of data provided by costing
department about the cost of various processes and activities as well as profit
on it, it helps to plan the future.
Periodical
determination of profit and losses: Cost accounting helps us to determine
the periodical profit and loss of a product.
Question.
7. What
are the advantages of cost audit? (10 marks)
Answer:
The important advantages of cost audit are briefly discussed as follows:
A.
Advantages Of Cost Audit To The Management
1.
Cost audit provides reliable cost data for managerial decisions.
2.
Cost audit helps management to regulate production.
3.
Cost audit acts as an effective managerial tool for the detection of errors,
frauds and irregularities so that reliable and smooth functioning of the system
is continued.
Question.
8. Which
ratios will help in determining the long term solvency of a business and how?
(10 marks)
Answer:
Solvency and liquidity are both terms that refer to an enterprise’s state of
financial health, but with some notable differences. Solvency refers to an
enterprise's capacity to meet its long-term financial commitments. Liquidity
refers to an enterprise’s ability to pay short-term obligations; the term also
refers to its capability to sell assets quickly to raise cash. A solvent
company is one that owns more than it owes; in other words, it has a positive
net worth and a manageable debt load. On the other hand, a company with
adequate liquidity may
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students get fully solved assignments
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your semester & Specialization name to our mail id :
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