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CMA Intermediate · Cost Accounting · Introduction to Cost Accounting

Which of the following is an essential characteristic of a good costing system, which should be kept in mind while installing it?

A good costing system should be simple, flexible and economical, so that the information it gives is worth more than the cost of producing it. Systems that are overly elaborate, permanently rigid or designed only for auditors do not meet the characteristics expected of a sound costing system.

  1. AIt should be simple, flexible and give information at a cost less than the benefit derived from itCorrect
  2. BIt should be as elaborate as possible regardless of expense
  3. CIt should be fixed permanently and never altered with business changes
  4. DIt should be designed to suit only the auditors' requirements

Explanation

A good costing system is simple, economical, flexible and acceptable to those who operate it. The benefit from the information should exceed its cost. Over-elaborate or rigid systems, or those serving only auditors, fail these tests.

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