COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Statements A & C
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Statement D only
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Statements B & D
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None of the above
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Detailed explanation-1: -Limitations of Cost Accounting – 6 Important Limitations: Expensive, Unnecessary, Not Applicable to Many Industries, Failure of Costing System, Reliable and a Few Others. Common sense and reasoning are the base on which cost accounting, as an art, is to be developed.
Detailed explanation-2: -First, cost accounting only considers financial data. Cost accounting relies on historical data, which may not be accurate or representative of future conditions. Another limitation of cost accounting is that it can be difficult to assign costs accurately to the correct products or services.
Detailed explanation-3: -Among the limitations of process costing are the cost errors that can accrue in the production system. Production cost errors often represent a significant disadvantage for cost accounting systems. Process costing does not use direct allocation to apply business costs to individual goods.
Detailed explanation-4: -It excludes indirect costs such as overhead and sales & marketing.