Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Meaning and Significance of Cost Accounting and its Relationship with Financial Accounting

Which of the following best describes a way in which cost accounting helps a manufacturing firm's management in day-to-day decision making?

Cost accounting gives management detailed cost data for each product, process or department. This helps in setting selling prices, deciding production levels and controlling expenses. It is an internal decision-support tool, unlike financial accounting, which mainly reports overall results to outsiders at the year end.

  1. AIt supplies detailed cost information per product or department so that pricing and production choices can be madeCorrect
  2. BIt records only the final profit of the whole firm at the year end for tax filing
  3. CIt replaces the need for any budgets or standards in the firm
  4. DIt reports the firm's cost data only to outside shareholders

Explanation

Cost accounting analyses costs by product, process and department, so managers can fix prices, choose product mix and control spending. The option limited to total yearly profit describes financial accounting, not the managerial role of cost accounting. Cost accounting supports budgets and standards rather than replacing them.

Did you get it right without looking?

One question tells you little. A timed set on Meaning and Significance of Cost Accounting and its Relationship with Financial Accounting shows your real accuracy, how long you take and where you lose marks.

Practise Meaning and Significance of Cost Accounting and its Relationship with Financial AccountingFree diagnostic mock

More Meaning and Significance of Cost Accounting and its Relationship with Financial Accounting questions