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cost accounting
Questions and Answers of
Cost Accounting
What are the purpose of uniform costing when it is introduced in an industry under a federation? What are the basic requirements of uniform costing?
Explain in brief, the advantages and limitations of uniform costing.
State the essential requirements for the installation of uniform costing system in an industry.
What are the areas of activity which a cost audit programme is expected to cover?
The statutory cost audit under the provisions of the Indian Companies Act is also intended to subserve social interests. Comment.
Distinguish between: (i). Cost audit and financial audit (ii). Cost audit and management audit.
Cost audit is a necessity and not a luxury and is viewed as a barometer to measure the operational performance, the effectiveness of utilisation and working results. Illustrate.
Explain the advantages of cost audit.
Is it correct to say that cost audit is efficiency audit. Give arguments.
Discuss the aspects usually covered in management audit.
What areas are covered in cost audit?
Explain the concept of value analysis as a technique of cost reduction.
Discuss the purpose of cost audit and circumstances under which a cost audit is desirable.
Define cost audit. How is it useful to: (i). Management (ii). Society (iii). Share holders (iv). Government?
What as a cost auditor will you verify in the area of work-in-progress?
Describe how a P/V chart is drawn. How does the P/V chart differ from a break-even chart?
Define and explain the concepts of standard cost and standard costing.
Discuss briefly the use of standard costs in the following management activities: cost reductions, operating performance, evaluation, product pricing decisions and providing incentives.
Compare and contrast the usefulness of ideal standards, basic standards, and currently attainable standards.
Standard costs are bases for a proper managerial control of manufacturing operation. Define standard cost and explain the above statement.
What is standard costing and how would you distinguish it from budgetary control?
What are the points of similarity and difference between budgeted and standard costs.
Variance analysis is an integral part of standard cost accounting. Explain this statement.
By purchasing low-grade materials, a company reports favourable material price variance, but it consistently experiences unfavourable material quantity variances. What relationship may exist between
What are the shortcomings of historical costs for managerial uses?
What is the difference between an estimated cost and a standard cost?
Describe briefly how standard costs are set for (a). Material (b). Labour.
Discuss some of the problems that might be created by standards which are set too high and by standards which are too loose.
What are the advantages and limitations of standard costing?
Discuss briefly shortcomings of standard cost system.
Explain why overhead variances are generally treated as period costs.
Discuss the information which a well-designed cost report should give to management from the point of view of production and control. How should such information be given?
What is a two variance analysis of factory overheads. Give a brief description.
Explain the term variance and distinguish between controllable and uncontrollable variances.
Describe briefly the managerial use of variances.
Point out the difference between historical costing and standard costing.
In analysing variance it is found frequently that an adverse variance from one standard is related directly to a favourable variance from another. Give two examples of such a situation and comment
Distinguish between standard costs and budgeted costs.
What is sales value volume variance?
Define variance analysis. What are the ways of disposing cost variances?
What is fixed production overhead variance? Explain how this is calculated and further analysed.
Distinguish between budgetary control and standard costing.
Explain fixed overhead cost variance.
In analysing variance, it is found frequently that an adverse variance from one standard is related directly to a favourable variance from another.Give two examples of such a situation and comment
Journalise the following transactions assuming cost and financial accounts are integrated: Raw materials purchases Direct materials issued to production Wages paid (30% indirect) Direct wages charged
In the absence of the Chief Accountant, you have been asked to prepare a months cost accounts for a company which operate a batch costing system fully integrated with the financial accounts. The
From the following particulars pass the journal entries in an integral accounting system:(a). Issued materials Rs. 3,00,000/- of which Rs. 2,80,000 (standard Rs 2,40,000) is direct material. (b).
The following transactions have been extracted from the financial books of a company: In costing books factory overhead is charged at 100% on wages, administration overhead at 10% of factory cost
Explain the need for reconciliation of cost and financial accounts.
Prepare a Reconciliation Account from the following details: Profit as per cost accounts were of Rs. 59,700 while the profits as per financial accounts were of Rs. 60,000. The values of opening and
From the following figures prepare reconciliation statement: Profit as per costing records Factory overheads under-recovered in costing Selling and Administration overheads over-recovered in
The following figure are available from financial accounts for the year ending 31st March, 2002: Factory overhead recovered at 20% on prime cost. Administration overhead at Rs. 3 per unit of
It has been stated that the results worked out from the costing records and those worked out from the financial accounts may not necessarily agree. Why?
During the year a companys profits have been estimated from the costing system to be Rs. 46,126, whereas the financial accounts audited by the auditors disclose a profit of Rs. 33,248. Given the
Give reasons as to why it is necessary to reconcile cost accounts and financial accounts. What is the accounting procedure to be adopted for their reconciliation?
From the following information, reconcile the profit as per cost accounts with financial accounts:Dividend and interest received Rs. 600. Loss on sale of investments Rs. 1,000. Interest charged by
From the information given below, prepare (i). A statement showing costing profit and loss.(ii). Another statement reconciling the costing profits with those shown by financial accounts:The normal
From the following figure, prepare a reconciliation statement: Profit Marketing overheads Provision for bad debts Factory overheads Director's fees Income Tax paid Rent of owned
Indicate the reasons why it is necessary for the cost and financial accounts of an organisation to be reconciled and explain the main sources of difference which would enter into such a
The profit as per cost accounts is Rs. 1,65,300. The following details are ascertained on comparison of the Cost and Financial Accounts. (a) Opening Stocks: Materials Work-in-progress (b) Closing
Discuss the main sources of difference between profit shown by financial accounts and profit shown by cost accounts.
Describe in brief the conditions which necessitate reconciliation of financial and cost records.
Gain More Ltd. showed a net loss of Rs. 6,30,000 as per the financial accounts for the year ended 31st March, 2004. The cost accounts however disclosed a loss of Rs. 5,00,000 for the same period. On
What is a reconciliation statement?. Give reasones for the difference in profit as per cost accounts and financial accounts.
From the following data prepare a Reconciliation Statement: Profit as per cost accounts Works overheads under-recovered Administrative overheads under-recovered Selling overheads
The profit and loss account of Oil India (Pvt) Ltd. for the year ended 31st March, 2003, is as follows:As per the cost records the direct expenses have been estimated at a cost of Rs. 30 per kg and
From the following Profit and Loss Account, draw up a Memorandum Reconciliation Account, showing the Profit as per cost accounts: The cost accountant of the company has ascertained a profit of Rs.
Hind General Corporation produces only one product which had the following costs. The normal capacity is set at 200,000 units. There are no work-in-progress inventories. In 2001, the company
What do you mean by marginal costing? Discuss its usefulness and limitations.
The following cost information relates to factory for two years. Work out the profit under absorption costing and marginal costing for the two years. Also state any abnormality in the results
To obtain the break-even point in rupee sales value, total fixed costs are divided by: (a). Variable cost per unit; (b). Contribution margin per unit; (c). Fixed cost per unit; (d). Profit/volume
Write a lucid note on marginal costing indicating its effect on profit computations.
The break-even point is the point at which: (a). There is no profit, no loss; (b). Contribution margin is equal to total fixed cost; (c). Total revenue is equal to total cost; (d). All of the
What are the most important areas of management decisions opened up by the application of the marginal (direct) costing method?
Stock, production and sales data for Industrial Detergents Ltd. are given below: The company has a single product, for which the financial data, based on an activity level of 60,000 litres per
The primary difference between a fixed budget and a variable (flexible) budget is that a fixed budget: (a). Includes only fixed costs, while a variable budget includes only variable costs. (b). Is
Marginal costs reveal the lowest price at which a product can be sold during a trade depression, but they also reveal to management the most profitable lines during the period of intense trade
Margin of safety is referred to as: (a). Excess of actual sales over fixed expenses;(b). Excess of actual sales over variable expenses; (c). Excess of actual sales over break-even sales; (d).
Discuss the following terms in relation to marginal costing.(a). Key factor, (b). P/V ratio,(c). Margin of safety.
Profit/Volume Ratio of a company is 50%, while its margin of safety is 40%. If sales volume of the company is Rs. 50 lakhs, find out its break-even point and net profit.
(a). What do you understand by the term margin of safety with reference to volume of production?(b). How do the following reflect on a break-even volume and on a P/V ratio; (i). Increase in total
Total fixed cost Rs. 12,000, Actual sales Rs. 48,000, Margin of safety Rs. 8,000. Determine the P/V ratio.
X Ltd. has earned contribution of Rs. 2,00,000 and net profit of Rs. 1,50,000 on sales Rs. 8,00,000. What is its margin of safety?
What do you understand by the term break-even analysis? Enumerate its uses.
When output is 3,000 units, the average cost per unit is Rs. 4. When output is increased to 4000 units, the average cost is Rs. 3.50 per unit. The break-even point is 5,000 units. Find the P/V ratio.
How do income statements prepared under the absorption costing and marginal costing concepts differ?
Contribution margin is known as (a). Marginal income (b). Gross profit (c). Net income (d). Net profit
Compared with absorption costing when will variable costing report lower profits, higher profits, the same profits?
The break-even analysis may be described as (a). Comparison between production and sales.(b). Comparison to make out capacity utilisation. (c). Comparison between target set and actual
The profit volume ratio of X Ltd. is 50% and the margin of safety is 40%. You are required to calculate the net profit if the sales volume is Rs. 1,00,000.
In what ways is variable costing better adapted to managerial use in profit planning, decision-making and control?
B & Co. has recorded the following data in the two most recent periods:What is the best estimate of the firms fixed costs per period? Total Cost of Production (Rs.) 14,600 19,400 Volume of Production
An increase in sales price.(a). Does not affect the break-even point.(b). Lowers the net profit. (c). Increases, the break-even point.(d). Lowers the break-even point.
Why do the supporters of marginal costing state that fixed costs are not to be included in inventories?
Profit under traditional costing and marginal costing system will be the same if.(a). There are no opening and closing stocks. (b). There is opening stock and no closing stock. (c). There is
Discuss the uses of CVP analysis and its significance to management.
In classifying a particular cost as fixed or variable, the volume or activity level is extremely important." Discuss and illustrate this statement.
Fixed cost per unit decrease when (a). Production volume increases.(b). Production volume decreases. (c). Variable costs per unit decreases. (d). Prime costs per unit decreases.
The contribution approach is the foundation of CVP logic and related techniques. Discuss.
Indian Plastics make plastic buckets. An analysis of their accounting reveals: Required: (i). Find the break-even point. (ii). Find the number of buckets to be sold to get a profit of Rs.
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