Questions and Answers of Cost Accounting

Within a relevant range, the amount of variable costs per unit.(a). Differs at each production level.(b). Remains constant at each production level (c). Increases as production increases.(d).
Discuss the role of contribution in marginal costing in decisions relating to fixation of selling price.
Margin of safety is referred to as.(a). Excess of budgeted or actual sales over the variable expenses and fixed expense, at break-even. (b). Excess of budgeted or actual sales revenue over the fixed
The most useful information derived from a break-even chart is the (a). Amount of sales revenue needed to cover variable costs. (b). Amount of sales revenue needed to cover fixed costs. (c).
State with reasons whether the following propositions are correct.(a). In an undertaking with a high fixed cost, break-even point can be attained at a lower level of activity. (b). Profit is
An enthusiastic marketing manager suggests to his managing director that only if he is permitted to reduce the selling price of a product by 20%, he would be able to achieve a 30% increase in sales
Each of the following would affect the break-even point except a change in the.(a). Number of units sold (b). Variable cost per unit (c). Total fixed costs (d). Sales price per unit.
Cadbury Schweppes Limited, a British chocolate and soft drink company, is planning to establish a subsidiary company in India to produce, Schweppes Mineral Water. Based on the estimated annual sales
Under marginal costing system, the contribution margin discloses the excess of.(a). Revenue over fixed costs (b). Projected revenues over the break-even point (c). Revenues over variable
Enumerate the factors which can change the break-even point.
The method of cost accounting that lends itself to break-even analysis is.(a). Variable (Marginal) (b). Standard (c). Absolute (d). Absorption
Triple X company produces these products with the following characteristics: Total fixed costs for the company are Rs. 12,40,000. Assuming that the product mix would be the same at the break-even
Marginal costing rewards sales whereas absorption costing rewards production. Comment.
Cost volume profit analysis allows management to determine relative profitability of a product by.(a). Highlighting potential bottlenecks in the production process. (b). Keeping fixed costs to an
Absorption costing obscures the total amount of fixed costs whereas variable costing highlights it Comment.
The following figures are available from the records of Venus Enterprises as at 31st March: Calculate: (a). The P/V ratio and total fixed expenses; (b). The break-even level of sales: (c). Sales
Two manufacturing companies which have the following operating details decide to merge. Assuming that the proposal is implemented, calculate: (i). Break-even sales of the merged plant and the
Mention some possible courses of action to improve profit-volume ratio.
Given the following notations, what is the break-even sales in rupees? (a) (c) SP FC + VC FC VC + SP (b) (d) VC SP - FC FC (SP - VC) + SP
What is meant by cost-volume-profit analysis? How CVP analysis is useful for the management?
Company A and Company B, both under the same management, make and sell the same type of product. Their budgeted profit and loss accounts for January June 2002 are as under:You are required to.(i).
What is the term that means all manufacturing costs (direct and indirect, variable and fixed) which contribute to the production of the product and are traced to output and inventories.(a). Job-order
Tractors Ltd. have an installed capacity of 5000 tractors per annum. They are presently operating at about 35% of installed capacity. For the coming year, they have budgeted as follows: Factory
Mention the basic assumption made for 'Break-even Analysis' and examine how far they are valid.
What costs are treated as product costs under variable (marginal) costing? (a). Only direct costs.(b). Only variable production costs. (c). All variable costs.(d). All variable and fixed
From, the following data, which product would you recommend for manufacture in the factory? Total machine hours available in the factory are 60000. Per unit of Standard manufacturing time Direct
What is profit-volume graph? Explain how it is drawn? What are its important limitations?
Discuss the importance of fixed and variable costs for decision making at project stage and at operations stage.
Calculate the effect on profit of a proposed change in Sales Mix from the following data: Existing sales mix Sales (in Rs.) Variable cost (in Rs.) Fixed cost (in Rs.) Proposed sales
Distinguish between marginal costing and absorption costing.
SV Ltd., a multi-product company furnishes you the following data relating to the year 2005: Assuming that there is no change in prices and variable cost and that the fixed expenses are incurred
The effect of a price reduction is always to reduce the P/V ratio, to raise the break-even point, and to shorten the margin of safety. Explain with a suitable illustration.
The Chief Cost Accountant of Vikas Limited found to his surprise that the actual profit for the period ending 30th June 2007 was the same as budgeted in spite of realising 10% more than the budgeted
Define break-even point. How can the break-even point be computed?
How is a break-even chart prepared? What information does the break-even chart give?
What are the basic assumptions in cost-volume-profit analysis under.(a). Absorption costing,(b). Variable costing?
The following set of information is presented to you by your client AB Ltd., producing two products X and Y. As a cost accountant, you are requested to present to the management of AB Ltd. the
Mr. X has Rs. 2,00,000 investments in his business firm. He wants a 15% return on his money. From the analysis of recent cost figures, he finds that his variable operating cost is 60% of sales and
For product-mix decisions, what criteria can be used to select products that will maximise net income?
A company seeking to improve its competitive position, has launched a cost reduction programme in its existing plants, apart from trying to increase output. The present profit before tax comes to
Break-even analysis assumes that variable costs and revenues are linear and that fixed costs are fixed. Briefly explain why these assumptions may not be realistic.
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 a period of intense trade
Can there be two break-even points. Show with the help of a graph.
Distinguish between contribution and profit.
The costs per unit of three products X, Y and Z are given below: Production arrangements are such that if one product is given up the production of the others can be raised by 50%. The directors
What is meant by the term differential costing? Does differential cost mean the same thing as variable cost?
The type of costs presented to management for a non-routine decision should be limited to. (a). Relevant costs (b). Standard costs.(c). Controllable costs. (d). Conversion costs.
What is incremental cost? Does incremental cost mean the same thing as variable cost?
Merry-make Cassets Co., is expecting a profit of Rs. 2,50,000 for the current year. The following further information is available from records.The companys production capacity is not fully utilised
Other things remaining the same, ideal product mix is determined in terms of.(a). Sales (b). Variable costs (c). Total costs (d). Contribution margin.
Give examples of how incremental costs are used in decision-making.
A departmental store is thinking of eliminating one of its departments because the accountant using the total cost basis to profitability analysis, says the department is operating at a loss. What
Relevant costs are.(a). Future costs. (b). Standard costs. (c). Controllable costs. (d). Historical costs.
Explain the meaning and features of relevant costs. Give suitable examples to support your explanation.
The decision maker should consider in case of limiting factor(s) to maximise the profit. (a). Sales. (b). Contribution margin. (c). Variable costs. (d). Fixed costs.
Ventilators Ltd. wants to stabilise its production through the year. The approaches recommended are: (a). Maintan production at an even pace throughout the year, and get the off-season production
The measurable value of an alternative use of resources is referred to as a (an). (a). Opportunity cost. (b). Imputed cost. (c). Differential cost. (d). Sunk cost.
What do you mean by 'make or buy' decision. State the quantitative as well as qualitative considerations in inflnencing a make or buy decision.
A manager of a company reported the total additional cost required for the proposed increased production level. The increase in total cost is known as. (a). Controllable cost (b). Incremental
Cost-benefit analysis is needed for resolving many managerial problems. List the various items of cost and benefits that you will quantify in respect of managerial decisions: (a). Add or drop a
A factory produces 24000 units. The cost sheet gives the following information: The product is sold at Rs. 20 per unit. The management proposed to increase the production by 3000 units for sales in
Which of the following is usually an incremental cost. (a). Conversion cost (b). Period cost (c). Manufacturing overhead cost (d). Direct product cost.
Explain the basic characteristics of costs involved in decision-making.
A machine tool manufacturing company sells its lathes at Rs. 36,500 each made up as follows: (a). A firm in Arabia has offered to buy 10 companys lathes at Rs. 28,500 each. Should the company be
A cost incurred in the past and hence irrelevant for current decision making is a. (a). Fixed cost (b). Discretionary cost (c). Sunk cost (d). Direct cost.
State the costing data required for (i). Determining the priority of products,(ii). Make or buy decisions.
A cost that cannot be changed by any decision made now or in the future is a (an). (a). Indirect cost. (b). Uncontrollable cost. (c). Opportunity cost. (d). Sunk cost.
How would you go about determining the point at which a manufacturing company that is facing a period of operating losses should shut assuming that profitability of operations is the only point to be
A company annually manufactures 10000 units of a product at a cost of 4 per unit and there is home market for consuming the entire volume of production at the sale price of 4.25 per unit. In the year
Due to industrial depression, a plant is running, at present, at 50% of its capacity. The following details are available. An exporter offers to buy 5000 units per month at the rate of Rs. 650 per
Why is the contribution that a product makes towards the recovery of non-escapable costs a bettr measure of its profitability than the profit or loss reported on its sale after it has been charged
An Electronics Company has the following cost structure for an electronic product.Fixed selling and administrative costs Rs. 6,00,000.Additional information: (i). Budgeted production and sale for
In the long run, selling price will tend to equal costs plus reasonable profits. Discuss.
List the factors taken into consideration in fixing the selling price by a business firm.
Discuss full cost-plus and marginal cost-plus methods of pricing. Which pricing method can be useful to a firm and under what situations.
Product pricing is an important area for management decision making. State briefly the broad objectives of pricing policy. Mention specifically situations where prices are fixed below the variable
Prepare a statement of equivalent production, statement of cost, process account from the following information using the average method: During the period 60,000 units were completed and
The first-in, first-out method of process costing differs from the weighted-average method in that the first-in, first-out method. (a). Considers the stage of completion of beginning
From the following figures show the cost of three processes of manufacture. The production of each process is passed on to the next process immediately on completion. Wages and materials Works
Prepare process cost accounts from the following data:Production overhead incurred is Rs. 1,60,000 and is recovered on 200% of direct wages. Production during the period was 20,000 units. There was
Define integrated accounting system. Distinguish it with non-integrated accounting system.
When should process costing method be used in assigning costs of products. (a). If the product is manufactured on the basis of each order received. (b). When production is only partially
From the following Figures, prepare process accounts indicating the cost of process and the total cost. The production was 480 articles per week. Office overheads amounting to Rs. 1,700 should
The following data are available pertaining to a product after passing through two processes A and B: Output transferred to process C from process B, 9120 units for Rs. 49,263.The wastage of process
Compare the cost accumulation and summarising procedures of a job order cost system and a process cost system.
Which is the best cost accumulation procedure to use when there is a continuous mass production of like units. (a). Actual (b). Standard (c). Job order (d). Process
What is equivalent production? What is its effect on computed unit cost?
Which of the following is a characteristic of a process costing method? (a). Work-in-progress inventory restated in terms of completed units.(b). Costs are accumulated by order. (c). It is
Normal wastage and abnormal wastage should be classified as: Normal (a) Period cost (b) Product cost (c) Period cost (d) Product cost Abnormal Period cost Period cost Product cost Product cost
In a certain process, material is mixed and cooked in batches of 1,000 lbs each. Cooking results in 10 percent loss of weight of the mixture. Since the cooking requires considerable skill and
The finished product of a manufacturing company passes through three Processes, viz., I, II and III. The normal wastage in each process is 5%, 7% and 10% for the Processes I, II and III respectively
How is opening work-in-progress handled in average costing?
Normal wastage is properly classified as: (a). An extraordinary item (b). Period cost (c). Product cost (d). Deferred charge
What are some of the disadvantages of the FIFO costing method?
If the amount of wastage in a manufacturing process is abnormal, it should be classified as: (a). Deferred charge (b). Joint cost (c). Period cost (d). Product cost
A product passes through three Processes A, B and C. 10,000 units a cost of Rs. 1.10 were issued to Process-A. The other direct expenses were as follows:The wastage of Process-A was 5% and in
What is the meaning of the term split-off? What is its significance in product costing?
The type of wastage that should not affect the recorded costs of closing inventories is: (a). Abnormal wastage (b). Normal wastage (c). Seasonal wastage (d). Standard wastage
An article passes through three successive operations from the raw material to the finished product stage. The following data are available from the production records of a particular month:(a).
What are joint costs? What problems are created by joint costs?

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