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Which TWO of the following statements about material flow cost accounting (MFCA) are correct?
Manufacturing costs are categorised into material costs, system costs and delivery and disposal costs
MFCA records material inflows and balances this with outflows both in terms of physical quantities and, at the end of the process, in monetary terms too, so that businesses are forced to focus on environmental costs.
In MFCA, output costs are allocated between positive and negative product costs.
The aim of flow cost accounting is to increase the quantity of materials which, as well as having a positive effect on the environment, should have a positive effect on a company’s total costs in the long run.
Answer is 1 and 3. Can you explain me as I don’t understand.
Environmental costs are difficult to deal with for an accountant. Which of the following is not a reason for this?
A Costs are often hidden
B Costs are mostly minor
C Costs are often very long term
D Accounting systems rarely split off these costs automatically
Answer is D. I did B. Can you help me?
For the first question, we do explain the two correct statements in our free lecture notes.
The second question is a bit tricky (and I think rather unfair). However if the costs are minor it makes them more difficult to identify. As far as D is concerned, the accountant should have the accounting system designed so that it does split off the costs. Even if it doesn’t split the costs, the accountant should be capable of doing it 🙂
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