ACCA Applied Knowledge · Management Accounting · Cost classification
Which of the following best describes the use of cost information for control rather than for planning or decision making?
Comparing actual costs with budgeted costs to investigate differences is a control use of cost information. Control looks at actual performance against plan so corrective action can be taken, whereas product cost estimates, make-or-buy choices and price setting are planning or decision-making activities.
- AComparing actual costs with budgeted costs to identify and investigate differencesCorrect
- BEstimating the cost of a new product before launching it
- CChoosing between making a component and buying it from a supplier
- DSetting next year's selling prices from forecast costs
Explanation
Control involves comparing actual results with plans and taking corrective action, so comparing actual with budgeted costs is a control use. Estimating new product costs, make-or-buy choices and price setting are forward-looking planning or decision-making uses.
Did you get it right without looking?
One question tells you little. A timed set on Cost classification shows your real accuracy, how long you take and where you lose marks.
More Cost classification questions
- A company codes its costs so that the code 2-1 denotes production overhead and 2-2 denotes administration overhead. During the month, $6,400…
- Which of the following is a direct expense rather than an indirect cost of a product?
- Dunmore Ltd's factory building is used 70% for production, 20% for the sales department and 10% for the administration offices. Total annual…
- Karlov Co manufactures 2,000 units. Costs for the period: direct materials $24,000; direct labour $18,000; direct expenses $2,000; factory i…
- Which of the following is a distribution cost rather than a selling cost?
- Orion Co's costs for a period were: direct materials $40,000, direct labour $30,000, factory indirect costs $20,000, administration costs $1…