🃏 Flashcards
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60 flashcards in this kit — the app reviews them with
spaced repetition so the right card returns on the right day.
Question
What are the two main purposes served by cost accounting records?
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Answer
Planning (estimates, budgets, quotations) and control (variance analysis, corrective action).
Question
How do cost accounts differ from financial accounts in terms of profit reporting?
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Answer
Financial accounts report overall profit; cost accounts report profit by product, department, or job.
Question
List any three functions of a cost accountant.
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Answer
Installs cost system, prepares cost statements, assists in budgeting, advises on pricing and profitability.
Question
What is the guiding principle for choosing an apportionment basis?
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Answer
Benefit received by the department.
Question
Define allocation.
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Answer
Charging a cost wholly and directly to one cost centre because it was incurred for that centre alone.
Question
Define apportionment.
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Answer
Dividing a common cost among several cost centres on an equitable basis.
Question
What is ABC analysis?
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Answer
Classification of inventory by value and usage: A items high value tight control, C items low value loose control.
Question
Under FIFO, how is closing stock valued?
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Answer
At the most recent purchase prices.
Question
Under LIFO, how is closing stock valued?
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Answer
At the oldest purchase prices.
Question
In rising prices, which method gives lower issue cost: FIFO or LIFO?
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Answer
FIFO gives lower issue cost because older, cheaper prices are issued first.
Question
State the formula for labour turnover rate.
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Answer
$$\text{Labour turnover rate} = \frac{\text{Number of replacements}}{\text{Average number of workers}} \times 100$$
Question
List any three causes of labour turnover.
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Answer
Low wages, poor working conditions, lack of promotion, poor supervision, personal reasons.
Question
List any three remedies for labour turnover.
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Answer
Fair wages, better working conditions, training and career development, employee participation, proper selection.
Question
What is the difference between apportionment and reapportionment?
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Answer
Apportionment divides common overheads among all departments; reapportionment pushes service department costs to production departments.
Question
Name four common bases for overhead apportionment.
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Answer
Floor area, machine hours, direct labour hours, number of workers, asset value, horsepower.
Question
What does a cost sheet show?
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Answer
Cost per unit and profit per unit for a product.
Question
What is the purpose of a process account?
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Answer
To apportion joint costs between joint products such as A and B.
Question
What does a contract account track?
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Answer
Material, labour, plant and work certified for a construction contract.
Question
How is cost per kilometre for a vehicle calculated?
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Answer
By combining fixed costs (licence, insurance, garage rent, driver wages) with variable costs (petrol, tyres, maintenance).
Question
What are the stages of a material control system?
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Answer
Purchase, receipt, storage, recording, issue, verification.
Question
What is a bin card?
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Answer
A record kept in the store showing quantity of materials received, issued, and balance.
Question
What is a stores ledger?
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Answer
A record showing both quantity and value of materials received, issued, and balance.
Question
What is the Pareto principle in the context of ABC analysis?
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Answer
A small fraction of items accounts for most of the value, so control effort should focus on high-value items.
Question
Give an example of a cost that would be allocated, not apportioned.
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Answer
Depreciation of a machine used only in Department A.
Question
Give an example of a cost that would be apportioned.
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Answer
Factory rent split among departments by floor area.
Question
What is the formula for issue cost under FIFO when 100 units @ ₹10 and 100 units @ ₹12 are bought and 120 units issued?
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Answer
$$(100 \times 10) + (20 \times 12) = 1,240$$
Question
What is the formula for issue cost under LIFO for the same data (100 @ ₹10, 100 @ ₹12, issue 120)?
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Answer
$$(100 \times 12) + (20 \times 10) = 1,400$$
Question
What is the closing stock value under FIFO for 100 @ ₹10, 100 @ ₹12, issue 120?
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Answer
80 units × ₹12 = ₹960.
Question
What is the closing stock value under LIFO for 100 @ ₹10, 100 @ ₹12, issue 120?
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Answer
80 units × ₹10 = ₹800.
Question
Why is high labour turnover costly even if not visible on payroll?
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Answer
Recruitment, training, lower productivity of new workers, scrap and accidents all rise.
Question
What is the first step in installing a cost accounting system?
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Answer
Design cost centres and reporting formats.
Question
How does cost accounting help in pricing decisions?
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Answer
It supplies cost data behind tender prices, transfer prices and product-mix decisions.
Question
What is the difference between planning and control in cost accounting?
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Answer
Planning uses estimates and budgets; control compares actuals to standards and takes corrective action.
Question
What is a material requisition?
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Answer
A document used to request issue of materials from stores.
Question
What is a goods received note?
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Answer
A document prepared on receipt of materials recording quantity and condition.
Question
What is stock verification?
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Answer
Periodic physical counting of stock and reconciliation with records.
Question
Name two service departments whose costs are reapportioned to production departments.
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Answer
Maintenance and stores (or canteen).
Question
What is the formula for labour turnover using average number of workers?
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Answer
$$\frac{\text{Replacements}}{\text{Average workers}} \times 100$$
Question
Give one example of a fixed cost in vehicle cost per kilometre.
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Answer
Insurance (or licence, garage rent, driver wages).
Question
Give one example of a variable cost in vehicle cost per kilometre.
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Answer
Petrol (or tyres, maintenance).
Question
What is the key difference between financial and cost accounting regarding profit analysis?
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Answer
Financial accounting gives overall profit; cost accounting gives profit by product, department, or job.
Question
Why is ABC analysis useful for managerial effort?
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Answer
It directs control effort to high-value items, avoiding waste on low-value items.
Question
What is the effect of rising prices on FIFO vs LIFO closing stock value?
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Answer
FIFO gives higher closing stock value; LIFO gives lower.
Question
What is the effect of rising prices on FIFO vs LIFO issue cost?
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Answer
FIFO gives lower issue cost; LIFO gives higher.
Question
What is the purpose of a purchase requisition?
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Answer
To formally request purchase of materials by the stores or user department.
Question
What is the role of inspection in material control?
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Answer
To check quality and quantity of materials received before acceptance.
Question
What is the difference between bin card and stores ledger?
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Answer
Bin card records quantity only; stores ledger records quantity and value.
Question
What is the formula for reapportionment of service department costs?
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Answer
Service department costs are distributed to production departments on a suitable basis reflecting benefit received.
Question
What is the main objective of cost accounting?
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Answer
To provide detailed cost information for planning, control, and decision-making.
Question
What is a cost centre?
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Answer
A location, person, or item of equipment for which costs are ascertained and used for control.
Question
What is the difference between direct and indirect costs?
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Answer
Direct costs are traceable to a cost object; indirect costs are common and apportioned.
Question
What is the purpose of a cost sheet in pricing?
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Answer
It shows cost per unit, which forms the basis for setting selling price and profit margin.
Question
What is the treatment of plant in a contract account?
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Answer
Plant is recorded at cost and depreciated; depreciation is charged to the contract.
Question
What is work certified in a contract account?
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Answer
Value of work completed and approved by the contractee's architect or engineer.
Question
What is the formula for labour turnover using separation method?
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Answer
$$\frac{\text{Separations}}{\text{Average workers}} \times 100$$
Question
What is the formula for labour turnover using replacement method?
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Answer
$$\frac{\text{Replacements}}{\text{Average workers}} \times 100$$
Question
What is the formula for labour turnover using flux method?
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Answer
$$\frac{\text{Separations} + \text{Replacements}}{\text{Average workers}} \times 100$$
Question
What is the effect of high labour turnover on productivity?
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Answer
Productivity falls because new workers are less efficient and require training.
Question
What is the role of grievance redressal in reducing labour turnover?
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Answer
It addresses employee complaints fairly, reducing dissatisfaction and separations.
Question
What is the role of training in reducing labour turnover?
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Answer
Training improves skills and career prospects, increasing employee retention.