Answer to Question #265416 in Finance for Robert

Question

Explain the following terms are applied in management accounting:

i) cost

ii) cost object

iii) cost estimate

iv) cost analysis

Answer 1

a) cost in management accounting refers to, the monetary value of expenditures for supplies, equipment,raw materials, services, labor, and products. Cost amount is recorded as an expense in bookkeeping record.

b) A cost object is a managerial term that refers to a product, process, department, or customer that costs originate from or are associated with. It’s something that costs can be identified with and traced back to. It aids with deriving pricing from a baseline cost to review if the costs are reasonable or to derive the full cost of a relationship with other entities.

c)cost estimate is an opinion regarding the forecasted cost of a program, product, or project.It is based on the best available information on the current date, and so may vary with additional information obtained over the years.

d)cost analysis is a measure of the relationship between cost and output that aids in determining the cost incurred in obtaining the input and how well they can be utilized to maximize the expected outcome and productivity of a firm.