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Arada [10]
3 years ago
7

Write down five (5) advantages and disadvantages of cost principle.​

Social Studies
1 answer:
myrzilka [38]3 years ago
3 0

Answer:

Explanation:

advantage:

1. Elimination of Wastes, Losses and Inefficiencies

2. Cost Reduction

3. Identify the reasons for Profit or Loss

4. Advises on Make or Buy Decision

5. Price Fixation

disadvantage:

1. Only past performances are available in the costing records but the management is taking decision for future.

2. The cost of previous year is not same in the succeeding year. Hence, cost data are not highly useful.

3. The cost is ascertained on the basis of full utilization of capacity. If capacity is partly utilized, the cost may not be true.

4. Financial character expenses are not included for cost calculation. Hence, the calculated cost is not correct always.

5. In cost accounting, costs are absorbed on pre-determined rate. It leads to over absorption or under absorption of overheads.

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