Which statement best describes cost reduction?
Correct answer: A. A permanent decrease in cost without reducing required quality
- A. A permanent decrease in cost without reducing required quality
- B. A temporary postponement of payment to suppliers
- C. An increase in selling price to improve total contribution
- D. A transfer of factory costs to the administration department
Explanation
Cost reduction seeks a genuine and continuing reduction in unit cost while maintaining the required quality and performance. Delaying payment or shifting costs between departments does not reduce the underlying cost.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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