Question 1. What Is Marginal Cost And Marginal Costing?
Marginal Cost :is the quantity at any given quantity of output through which mixture fees are changed if the quantity of output is improved or reduced by using one team spirit. The aggregate costs consists of each, constant price and variable cost. In easy words, marginal value shows the in step with unit variable fee.
Marginal Costing :is on the other hand is the ascertainment, through differentiating among fixed costs, variable charges, of the marginal expenses and of the impact on earnings of changes in volume and kind of output.
Question 2. What Is Sunk Cost?
Sunk value shows the historic price which has been incurred in the beyond. This form of value isn't always relevant within the choice making manner. For instance-whilst determining approximately the substitute of a device, the depreciated book value of the device might not be relevant inside the form of sunk value.
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Question 3. What Do You Understand By Cost Accountancy? What Are The Objectives Of Cost Accountancy?
Cost accountancy is the utility of Costing and Cost accounting standards, techniques, and strategies to the technological know-how, art and exercise of cost control and the ascertainment of profitability in addition to the presentation of statistics for the purpose of managerial decision making.
Following are the goal of cost accountancy:
Ascertainment of value and profitability with the help of numerous standards, strategies and strategies.
Presentation of information to enable managerial decision making.
Question four. What Do You Understand By Cost Center? What Are The Types Of Cost Centers?
Cost center is defined as a area, individual, or item of system with regards to which prices may be ascertained and used for the reason of cost control. Identification of a price middle is a prerequisite for the a success implementation of the fee accounting manner as the prices are ascertained and controlled with respect tot the fee centers. In many instances price centers are termed as Responsibility Centers.
Types of value centers:
1. Impersonal value middle – Consists of place or item of equipment.
Example - department, branch etc.
2. Personal price middle – Consists of a person or a collection of humans.
Example – finance supervisor, sales manager and so on.
3. Production fee middle – Is the only where the manufacturing pastime is carried on.
For instance - paint save, a machine store, and so forth.
4. Service fee centers – Is the only which assists the manufacturing hobby.
For instance - keep department, inner transport department, labour workplace, money owed department, and so forth.
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Question 5. What Are The Different Types Of Cost?
Cost suggests the quantity of expenditure incurred on a given aspect.
Following are the distinct types of cost:
Direct Cost – also termed as Prime fee. It shows that price which can be diagnosed with the character fee middle. It includes direct fabric fee, direct labour value and direct costs.
Indirect Cost – also termed as Overhead. It shows that cost which cannot be recognized with the man or woman cost middle. It includes oblique fabric price, indirect labour price and oblique charges.
Fixed Cost – indicates that part of total fee which remains consistent at all the degrees of production. As the volume of production will increase, according to unit fixed price can also lessen, however no longer the full fixed fee.
Variable – indicated that part of the total fee which varies at once with the level of production. The higher the quantity of manufacturing, the better the variable cost and vice versa, though according to unit variable price stays regular at all of the stages of production.
Semi-variable value – indicates that portion of the full fee that's partly constant and in part variable when it comes to the extent of manufacturing.
Controllable cost – indicates that fee which may be controlled via a selected number of individuals within the organization
Uncontrollable value – shows that value which cannot be controlled by a specific wide variety of people in the corporation.
Normal cost – suggests that cost that's typically incurred at a certain stage of output below everyday circumstances.
Abnormal value - indicates that fee which is generally no longer incurred at a certain level of output below regular circumstances.
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Question 6. Which Factors Should Be Considered Before Installing A Costing System?
Nature of the Product
Nature of the Organization
Simplicity and Cost
Question 7. What Are The Elements Of Costs?
Elements of charges
Material Cost – is the value of commodities and fabric used by the organization. It may be direct and indirect cloth. Direct fabric indicates that cloth which can be diagnosed with the character price center and which becomes an essential part of the finished items. Indirect cloth indicates that material which can't be recognized with the character price center. This cloth assists the manufacturing manner and does not turn out to be an indispensable part of completed goods.
Labour Cost – is the price of remuneration paid to the employees of the corporation. It can be direct or oblique. Direct labour price suggests that labour value which may be recognized with the person fee middle and is incurred for those employees who are engaged inside the manufacturing manner. Indirect labour price suggests that labour value which cannot be recognized with the character price center and is incurred for the ones personnel who aren't engaged in the production technique however most effective assist within the identical.
Expenses – is the cost of services supplied to the corporation. It may be direct or oblique. Direct prices are those fees which can be recognized with the man or woman fee facilities. Indirect fees are those prices which can not be identified with that person fee centers.
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Question eight. What Items Are Included In Prime Cost?
Prime Cost is an combination of direct material cost, direct labour price and direct costs.
Question 9. What Is Overhead? What Items Are Included In Overhead?
Overhead is an aggregate of indirect fabric value, oblique labour price and indirect fees.
Overheads are similarly categorized as:
Factory Overheads – Consists of all overhead fees incurred from the level of procurement of material until the level of manufacturing of completed goods
Office and Administration Overheads – Consists of all overhead charges incurred for the overall administration of the agency.
Selling and Distribution Overheads – Consists of all overhead fees insured from the stage of final production of finished goods till the degree of sale of goods in the market and collection of dues from the clients.
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Question 10. What Are Non Operating Financial Incomes And Non Operating Financial Expenses?
Non running monetary income represents that profits which arises no longer as a part of regular operations of the organisation. Due to those earning operating earnings as consistent with price assertion can be less than profit as in line with Profit and Loss account. For instance: earnings at the sale of property, dividend received and so on.
Non operating monetary rate represents that rate which arises now not as part of ordinary operations of the organization. Due to these prices the running profit as per the value announcement can be extra than the income as consistent with Profit and Loss Account. For example: a loss at the sale of property, provision for earnings tax, interest paid and so forth.
Question 11. What Are The Main Consequences Of Overstocking?
It will block a massive quantity of operating capital.
More garage facilities can be required.
Risk of decay of great and obsolescence of material.
More attention could be required in cloth dealing with and up maintaining.
Additional Insurance cost.
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Question 12. What Is The Difference Between Bin Card And Stores Ledger?
Bin Card is a quantitative record of receipts, problems and closing stability of an object of material. Whereas Stores ledger information no longer handiest quantities acquired or issued or in inventory however also the monetary expressions of the same.
Bin Card is maintained with the aid of shops branch whilst stores ledger is maintained by costing department.
Maintenance of shops ledger presents a 2d test on upkeep of bin playing cards.
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Question thirteen. What Are The Various Ways To Classify Overhead?
Element sensible Classification:
Function sensible Classification:
Selling and Distribution Overheads
Variability sensible Classification:
Controllability wise Classification:
Normality wise Classification:
Question 14. What Is The Difference Between Simple Average Method And Weighted Average Method?
Under Simple average method: the simple average of the prices of the plenty available for making the problems is considered for pricing the problems. After the receipt of recent lot, a new common rate is worked out. This approach is suitable if the fabric is obtained in uniform amount.
Under Weighted common method: the price of each lot and the quantity of the identical is taken into consideration. This technique proves to be very beneficial within the event of various costs and portions. It is very simple to calculate.
Question 15. What Are The Limitations Of Marginal Costing?
The classification of general value as variable price and stuck price is tough as no cost can be absolutely variable or absolutely fixed.
Fixed expenses are removed for the valuation of inventory of completed goods and semi-finished goods in spite of the reality that they may have been truly incurred.
It does now not provide any general for the evaluation of overall performance.
Fixation of selling rate on marginal price foundation may be useful for quick time period most effective and may be risky in the end.
It does now not recollect the constant overheads.
It can be used for assessment of profitability handiest within the short run.
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Question sixteen. What Is P/v Ratio?
P/V Ratio is Profit Volume Ratio which shows the contribution earned with recognize to one rupee of sales. The essential assets of P/V Ratio is that it stays regular at all of the ranges of activities, supplied in keeping with unit sales price and variable cost stays consistent. A high P/V ration indicates that a slight growth in income without corresponding increase in fixed costs will bring about higher income while a low P/V ratio suggests low profitability so that efforts can be made to growth the income by using growing selling price or through lowering variable value.
Question 17. What Are The Basic Assumptions Made By Marginal Costing?
Marginal Costing is primarily based on the following the simple assumptions
Variable value varies in direct share with the level of hobby whereas in keeping with unit variable cost remains regular at all of the tiers of activities.
Per unit promoting price stays constant at all the tiers of sports.
There are no versions due to the inventory.
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Question 18. What Do You Understand By Margin Of Safety?
Margin of safety are the sales past Break Even Point. In simple words, that is the amount of sales which generates income. The soundness of the enterprise is indicated by means of the margin of protection. A high margin of safety suggests that the Break Even Point is a good deal under the actual sales or even if there is reduction in sales, enterprise could be nevertheless in income while a low margin of safety accompanied with the aid of high fixed fee and excessive P/V ration indicates that efforts are required to be made for lowering the constant price or growing income quantity.
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Question 19. What Are The Different Methods Of Remunerating The Workers?
Remuneration on time basis
High Wage Plan
Differential Time Rate
Remuneration on paintings basis
Straight Piece Rate System
Piece Rate with Guaranteed Time Rate
Differential Piece Rate System
Individual Incentive systems
Group Incentive systems
Indirect financial remuneration
Question 20. Explain Maximum Level And What Are The Main Factors Considered While Fixing This Level?
Maximum level is the level above which the actual stock display Following factors are considered while fixing this stage:
Price of Material
Cost of Storage
Availability of Funds
Economic Order Quantity.
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