Cost Information and Decision Making

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Q 1: 10 marks For what decisions would estimated cost information be useful if you were a hospital administrator? The Director of a Cinema hall? The Marketing vice president of a bank? Cost information is the information about the different costs that are incurred in the operation of the organization or a business process. Here the cost includes all cost like material cost, labor costs, and all other overhead costs that are incurred depending on the type of business they operates. The main objectives of cost information are: 1)To ascertain the cost per unit for different products.

2)To have correct analysis about the cost incurred.
3)To disclose source of wastage whether material, time or expenses. 4)To provide requisite data and serve as a guide to price fixing. 5)To reveal the source of economy.
6)To help in preparation of budget.
7)To organize internal audit system to ensure effective working. HOSPITAL ADMINISTRATOR:
In hospital, different costs are involved such as on purchase of different kinds of medicines, equipments, antibiotics, etc and for employing different people where they are needed to pay salaries and wages etc. they should also incur transportation cost and other overhead costs for the operation of day to day operations. They should ascertain the cost incurred on the medicines, salaries and wages to the staff and employees, and to know total units consumed during certain period of time, how many people are employed and their effectiveness in their work. So by having cost information, it helps the hospital administrator in making decisions like: a)How much quantity of what medicine should be ordered within the specific time period? b)How many people to be employed and at what wages or salaries? c)What are needed and what not?

d)Helps in ascertaining different amount of budget for different activities, materials…. Etc. e)It also helps in on what field the training and developments are needed. DIRECTOR OF CINEMA HALL:
Being a director of a cinema hall it is very important to have cost information about the total cost and per unit cost incurred while building the hall or the hiring cost, monthly or per unit electric charges, per unit cost of furniture, screen cost, projector and any other cost involved while installing the infrastructure in the hall.

So the estimated cost is useful for the Director of cinema hall to: 1.To fixed the rent for the movie screener.
2.Helps in determining the most profitable pricing.
3.Helps to control the cost involved, since the cost information helps in figuring out the unnecessary cost incurred. 4.To decide the further investment is worthwhile or not.
5.If he screens movie, then it helps in deciding and ascertaining per ticket cost. MARKETING VICE PRESIDENT OF BANK:
Here the marketing vice president of the banks deals with the process of giving loan and receiving the deposits from the public, while doing so they have to employ people, they needs stationeries like pen, paper, books, register, desktop, ATM services, fund transfer etc. where it involves costs. So the cost information is very important for:

1.Fixing the interest rates for savings and loans.
2.Helps in budgeting for further development.
3.Helps in deciding whether a particular market should be tapped or not. 4.Whether to invest in new technology or not.
5.Whether to expand the business or not.
Q2: 10 marks “Costs may be classified in a...
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