ABC PvtLtdis a new small manufacturing firm for formals and casuals wears. Product range included shirts, T- Shirts (Full & Half sleeves), trousers and jeans.

As it is a newly introduced firm, the burden is on the Finance Manager to decide the accounting method for maintaining books of account.

By considering all the factors determining cost, such as cost structure, condition of market, type of consumer, area of distribution, capacity of supply, product's demand & supply, manager has to decide and follow theCost Accounting for maintaining factory A/c or Manufacturing A/c. Cost Accounting. It does not includes physical stock-taking, but it includes detailed & relevant cost figure of closing stock, raw material, work-in-progress andfinished goods which helped the manager to find out most suitable and accurate cost per unit. This also helped him to avoid - material wastages, use of obsolete machinery, poor planning.

He took control over material, labour and overhead expenses, and started discussing day-to-day operations of business, so he can take remedial actions. Moreover, introduction of a cost reduction programme combined with operational research and value analysis lead to improvement in economic as well as financial condition of the firm.

Questions for Discussion

(1) How cost Accounting helps the firm in determining the Selling Price?

(2) According to you, by adopting Cost Accounting method, Can a firm prepare a Financial Statement?

(3) Which kind of operating policy decision can we take by using Cost Accounting Method?

(4) From the case, what are the benefits enjoyed by a firm, by adopting Cost Accounting?

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