Explain three characteristics of an ideal
costing system
Answers
Explanation:
(i) Suitability to the Business: ...
(ii) Simplicity: ...
(iii) Flexibility: ...
(iv) Economical: ...
(v) Comparability: ...
(vi) Capability of Presenting Information at the Desired Time: ...
(x) Minimum Changes in the Existing Set Up: ...
(xi) Uniformity of Forms:
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Characteristics of an Ideal Costing System:
An ideal system of costing is that which achieves the objectives of a costing system and brings all advantages of costing to the business. Following are the main characteristics which an ideal system of costing should possess or the points which should be taken into consideration before installing a costing system......
1: Suitability to the Business:
A costing system should be tailor-made, practical and must be devised according to the nature, conditions, requirements and size of the business. Any system which serves the purposes of the business and supplies necessary information for running the business efficiently is an ideal system.....
2: simplicity:
The system of costing should be simple and plain so that it may be easily understood even by a person of average intelligence. The facts, figures and other information’s provided by cost accounting must be presented in the right form at the right time to the right person in order to make it more meaningful.
3: Flexibility:
The system of costing must be flexible so that it may be changed according to changed conditions and circumstances. The system without such flexibility will be outmoded because of fast changes in business and industry. Thus, the system must have the capacity of expansion or contraction without much change.