Cost Ascertainment I - Introduction to Cost Accounting, Cost Accounting Video Lecture | Cost Accounting - B Com

Ans. Cost ascertainment in cost accounting refers to the process of determining and calculating the various costs incurred by a business in producing goods or providing services. It involves identifying and measuring both direct and indirect costs associated with the production process, including materials, labor, overheads, and other expenses. Cost ascertainment is essential for accurate financial reporting and decision-making within an organization.

Ans. Cost ascertainment is important in cost accounting for several reasons. Firstly, it helps in determining the actual cost of producing goods or providing services, which is crucial for setting appropriate selling prices and ensuring profitability. Secondly, it provides valuable insights into cost behavior and cost drivers, allowing businesses to identify areas for cost reduction and efficiency improvement. Additionally, cost ascertainment helps in budgeting, variance analysis, and evaluating the financial performance of different products or services.

Ans. There are various methods of cost ascertainment used in cost accounting, including: 1. Job costing: This method involves assigning costs to each specific job or project, often used in industries such as construction and consulting. 2. Process costing: This method is used when products are manufactured through a continuous production process, and costs are assigned to each process or department. 3. Activity-based costing (ABC): ABC is a method that identifies and assigns costs to specific activities or tasks, providing a more accurate understanding of cost drivers and resource consumption. 4. Standard costing: This method involves setting predetermined standard costs for various inputs and comparing them with actual costs to analyze variances. 5. Marginal costing: Marginal costing focuses on analyzing the impact of changes in production volume on costs and profitability, primarily used for short-term decision-making.

Ans. Cost ascertainment and cost allocation are two related concepts but with slight differences. Cost ascertainment involves determining and calculating the various costs incurred by a business, while cost allocation refers to the process of assigning or distributing these costs to specific cost objects such as products, services, departments, or activities. In other words, cost ascertainment focuses on the overall identification and measurement of costs, whereas cost allocation deals with the allocation or apportionment of these costs to different cost centers or cost objects. Cost allocation is often necessary when indirect costs cannot be directly attributed to a specific cost object and need to be distributed based on some predetermined allocation basis.

Ans. Cost ascertainment plays a vital role in decision-making within an organization. By providing accurate and detailed information about costs, it helps in evaluating the profitability and financial viability of various options. For example, cost ascertainment can aid in deciding whether to produce a product in-house or outsource it, determining the most cost-effective pricing strategy, or identifying opportunities for cost reduction and efficiency improvement. Moreover, cost ascertainment allows for better budgeting and forecasting, as it provides insights into cost behavior and cost drivers. By analyzing cost variances and identifying areas of cost overruns or savings, managers can make informed decisions to control costs, improve profitability, and optimize resource allocation.