The main purpose of cost accounting is to find out the cost of the various processes in the business so that selling prices can be fixed appropriately.
<h3>What is cost accounting?</h3>
This is an accounting method that allows companies to find out the cost of various processes and transactions they embark on.
Knowing these costs will enable the company to know the price it can charge on goods so that it can recoup these costs and make profits.
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I think this is a trick question. Say, there are 2 pounds of cocoa / 1 gallon of chocolate ice cream. But then the problem only mentions the production of eight gallons of <em>strawberry</em> ice cream, not chocolate ice cream.
However, if they're somehow related (like they are made from the same machine), then you need 16 pounds of cocoa to produce 8 gallons of chocolate ice cream.
Answer and Explanation:
In this particular case, the working capital continues to fall and hits a value below zero otherwise the business would have a negative cash flow.
Company's assets are below its liabilities which including its current working capital would not be able to manage its debts. The Company would be faced with extreme difficulty in paying back its creditors.
If, as in the case at hand , the company continues to operate in low working capital and work capital declines over time, the company can encounter extremely serious financial problems.
Following Effects may include declining revenue from purchases, non-inventory management, or issues with the specific total accounts receivable.
