JBIET MBA II YEAR I SEM I MID 2012 BATCH DECEMBER 2013
COST AND MANAGEMENT ACCOUNTING
MAX MARKS 40. 4X10
1.
Define cost center, profit center and state their
differences
a.
Cost center: smallest segment for which costs
are accumulated: personal, impersonal cost center; operation and process cost
center; production and service cost center
b.
Profit center:
segment of biz activity which is responsible for revenue and expenses
and discloses profit of segment
c.
Differences:
d.
cc: smallest unit of activity; pc: biz segment with revenue and expenses
e.
cc: accounting convenience of cost control; pc:decentralization of operations
f.
cc: not autonomous; pc: autonomous
g.
cc:no target cost, minimum cost; pc:profit target, +authority
h.
many ccs = 1 pc; many pcs = 1 firm or subsidiary.
2.
What is costing, scope of cost accounting and
objectives of cost accounting
a.
Costing/ cost accounting: application of
costing, cost accounting methods, cost control and profitability; ascertain
costs, classify, record, allocate expenses for determination of costs of
product and services
b.
Scope: cost ascertainment; cost accounting; cost
control
c.
Objectives:
i.
cost per unit
ii.
analysis of cost
iii.
source of wastage
iv.
price fix guidance
v.
product profitability
vi.
control of stocks
vii.
source of economy
viii.
advice on future expansion
ix.
interpret data for decision making, control
x.
preparation o f budgets and control
xi.
efficient information system
xii.
incentive bonus system
xiii.
data for
new product
xiv.
computer data processing
xv.
internal audit
xvi.
cost reduction programme
xvii.
cost audit
xviii.
identify cost profit and loss reasons
d.
i.e.
e.
ascertainment of costs
f.
accumulation and utilization of cost data
g.
data for management decision making
3.
define the following terms
a.
specific order costing: order based
b.
operation costing : operation based
c.
contract costing: contract based
d.
batch costing: batch of operations or product
units
e.
service costing: service based
f.
farm costing : farm based
g.
multiple costing: 2 or 3 of above in
hierarchical order
4.
write a note on
the following cost drivers
a.
conversion: raw material to finished goods
b.
contribution margin: SP – VC
c.
carrying cost: interest cost
d.
oout of stock cost: stoppage of work as out of
stock material
e.
ordering cost: process cost order
f.
development cost : idea to product proof of
concept cost
g.
policy cost: normal + cost on account of policy
h.
discretionary cost: decision based cost
i.
idle facilities cost: abnormal idleness of
facilities cost
j.
expired cost: loss or expense of current period
k.
incremental revenue: between two alternatives
l.
added value: change in market value – on creation
of value of form, location, availability
m.
urgent cost: immediate order and supply + cost
n.
post ponable cost: shift current cost to future
period
o.
pre production cost: before start of production
p.
research cost: discovery cost
q.
training cost: training of workers
5.
classify the costs based on the following:
a.
nature: material, labour, expenses
b.
function: production, administration, selling
and distribution
c.
traceability: direct vs indirect
d.
activity/ volume: FC/VC, committed cost, policy
cost, discretionary, step cost
e.
by controllability: controllable, uncontrollable
f.
normality: normal vs abnormal
g.
accounting
period: capital, revenue
h.
time: historical, predetermined
i.
planning and control: bugetted cost, standard
cost,
j.
product: product cost, period cost
k.
managerial decision: explicit, implicit costs.
6.
Problem:
a.
Cost of raw material: 30000
b.
+purch raw matl: 450000
c.
Total matl: 480000
d.
–closing stock: 25000
e.
Cost of matl consumed 455000
f.
Direct wages 230000
g.
PRIME COST 685000
h.
+Factory OH 92000
i.
FACTORY COST 777000
j.
+OP. Work in process 12000
k.
Total 789000
l.
–closing WIP 15000
m. Factory or works cost 774000
Income statement for HYE 30.6.2007
Sales 900000
-
COGS
·
Op stock FG 60000
·
+ Factory cost 774000
·
Total fact cost 834000
·
-cl.stock FG 55000 779000
·
Gross profit 121000
·
-indirect exp
·
Admn exp
30000
·
Selling & distr exp 20000 50000
·
NET
PROFIT 71000
