Question

What is the responsibility of the manager when it comes to costs? Why is important that the manager knows all the differences in the costs? This question is related to Managerial Accounting

Answer 1

The responsibility of the manager in relation of costs are:

• The manager should control the cost of production by applying various techniques of cost control like marginal costing, CVP analysis, break even analysis, ABC costing, etc.
• To ascertain the total cost of production and per unit cost of the product.
• Cost must be identified and classified as per various cost heads.
• All the overhead cost must be identified and absorbed.

The manager should know all the variances relating to various costs. This will help them to find out the unfavorable areas and take remedial measure accordingly to control the cost. The differences will help the manager to take decisions in a better way. For example difference between budgeted material cost and actual material cost will help to identify whether materials have been purchased a higher rate from wrong supplier or excessive materials have been used in production.