Answer:
The correct answer is True.
Explanation:
A cost accounting system must contemplate the need for the information obtained from it to be of real utility to the company.
A well-designed cost system will offer the assurance that the information provided to management will be a more effective means of making decisions.
The primary objective of any cost accounting system is the determination of the unit cost of production; consequently, the unit cost of production represents the means by which the entity's management is going to be used to achieve the following objectives:
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Plan and control the production of articles.
For the manufacture of an article raw materials of different quality and price can be used, personnel with greater or lesser degree of specialization and productive machinery of different capacity, class and acquisition cost.
The method of production that the company implants and the most convenient and profitable cost for the company will be the one that allows to manufacture items of the highest quality and at the lowest possible unit cost.
- Plan and control the distribution or sale of items
A good cost system that provides timely and secure data of the unit production cost, will allow the company administration to structure satisfactory sales prices that reasonably guarantee the obtaining of profits
- Make the administration of the company's activities more efficient.
The information contained in the financial statements of a company is a fundamental tool for the administration to carry out its activities.
When the cost system contemplates the need to present to the administration an analytical and not only global information, the Financial Statements may include very valuable data related to profit margins by type of items, investment amounts wages and salaries and other manufacturing expenses for each group of manufactured satisfiers, and therefore a much more accurate picture of the activities, the company that will allow evaluation, and operate changes in those areas that require them.
