Cost Accounting Systems. When Auditing a Manufacturing Concern, What Major Inquiries Might Be

question 101

Essay

Cost accounting systems.
When auditing a manufacturing concern, what major inquiries might be made by the auditor about the cost accounting system?

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Definitions:

Variable Cost

Costs that fluctuate in relation to the level of output or production, such as raw materials and direct labor expenses.

Operating Cash Flow

Describes the cash generated by the regular operating activities of a business in a specific period.

Contribution Margin

The amount by which the sale of a product or service exceeds its production costs, contributing to the covering of fixed costs and generating profit.

Financial Break-Even

The point at which total revenues and total expenses are equal, resulting in a net income of zero and indicating that a project or business is neither losing nor making money.