Cost accounting principles

Question 1

Cause-and-effect principle

Answer 1

cost must be charged to those objects that give rise to them

Question 2

Proportionality principle

Answer 2

Linear relationship between costs and amount of cost drivers

Question 3

Average principle

Answer 3

The cost amount is divided by the total number of cost objects and each cost object has to bear the same cost amount

Question 4

Ability to bear principle

Answer 4

cost object that can bear higher cost is allocated a bigger share of indirect cost