Contents:

Chapter 1:
1. Define Cost Accounting.
2.show cost accounting cycle with diagram.
3.what are the objectives of cost accounting?
4."Cost accounting has become an essential tool of management "explain.
5. Discuss the types or techniques of costing.

Chapter 2:
1. Cost & expenses are same. Do you agree?
2. What is meant by term cost behavior? Classification of cost on the basis of behavior.
3. Show the element wise classification of cost.
4. Describe the importance of Cost sheet.

Chapter 3:
1. Distinguish between product cost and period cost.
2. "A variable cost is cost that varies per unit of product, whereas a fixed cost is constant per
unit of product" do you agree? Explain.
3. Distinguish between a variable, a fixed cost and a mixed cost.

Chapter 4:
1. What are the techniques of Inventory Control System?
2. What is FIFO method? Describe the advantage and disadvantage of FIFO method.
3. What is weighted average method? Describe the advantage and disadvantage of weighted
average method.
Chapter 5:

1. Explain the fundamental differences between straight piece-work and differential piece-
work.
2. What is idle time?
3. What are the differences between Halsey plan and Rowan plan?
4. What are the two basic methods of remuneration of labor?

Chapter 6:

1. What is Overhead?
2. Describe Overhead Allocation/Distribution, Apportionment and Absorption.
3. What are the methods of distribution of service department overhead to production
department? Mention any two methods.

Chapter 7:
1. Describe the characteristics of contract costing.
2. Features of contract costing.
3. Differentiate between job costing and contract costing.

Chapter 8:
1. Define service costing.
2. The essential features of operating costing.
Chapter # 01:

Q # 1. Define Cost Accounting.

Answer: Cost accounting is the process of collecting information about the costs incurred by a
company’s activities, assigning selected costs to products and services and other cost objects,
and evaluating the efficiency of cost usage.

Q # 2. Show cost accounting cycle with diagram.

Answer: Cost accounting cycle is given below:

Cost accounting cycle

1.Recording Cost Data
2.Cost Classification
3.Determination of Total Cost.
4.Unit Cost.
5.Selling Price
6.Cost Control and Decision Making.

Q # 3. What are the objectives of cost accounting?

Answer: The main objectives of cost accounting can be summarized as follows:
a) Ascertaining Costs.
b) Determining Selling Price.
c) Measuring and Increasing Efficiency.
d) Cost Control and Cost Reduction.
e) Cost Management.
f) Ascertaining Profits.
Q # 4."Cost accounting has become an essential tool of management "explain.
Answer:
The limitation of financial accounting has made the management to realize the importance of
cost accounting. The importance of cost accounting is as follows:
Helps in Ascertainment of Cost:
Aids in Price fixation:
Helps in Cost reduction:
Elimination of wastage:
Helps in identifying unprofitable activities:
Helps in Checking the accuracy of Financial Account:
Helps in fixing selling prices:
Importance of Employees:

Q # 5. Discuss the types or techniques of costing.

Answer: Techniques of Costing are as Follows:
a) Marginal Costing
b) Direct Costing
c) Absorption or Full Costing
d) Uniform Costing
e) System of Costing
i. Historical Costing
ii. Post Costing
f) Continuous Costing
Chapter 2:

Q # 1. Cost & expenses are same. Do you agree?

Answer: The terms ‘cost’ and ‘expense’ are commonly used words in the fields of business,
economics and accounting. Most often these terms can be used interchangeably without issue.
In accounting however, the terms have quite different meanings. Basically, sacrificing
resources(money) to acquire product is called cost. Using up the value of those products to
generate revenue for a business is called an expense.

Q # 2. What is meant by term cost behavior? Classification of cost on the basis of behavior.
Answer: The behavior of costs is seen with respect to the change in volume. On this basis, costs
are classified into fixed costs, Variable cost and Semi-variable Costs. Fixed costs do not have
change with small change in volume, variable costs do change. Semi-variable costs have
characteristics of both fixed and variable costs.
Cost Behavior refers to the way different types of production costs change when there is a
change in level of production. There are three main types of costs according to their behavior:
a) Fixed Costs:
b) Variable Costs:
c) Mixed Costs:

Q # 3. Show the element wise classification of cost.

Answer: Classification of costs into element wise, i.e., into material, labor and expense is called
element wise classification. Here the total cost is analyzed on the basis of the nature of
expenses. The different elements are the following:
1. Direct Material
2. Direct labor
3. Direct Expenses or chargeable Expenses
4. Indirect Cost
Q # 4. Describe the importance of Cost sheet.
Answer: The importance of cost sheet is as follows:
(i) Cost ascertainment: The main objective of the cost is to ascertain cost of a product.
Cost sheet helps in ascertainment of cost for the purpose of determining cost after
they are incurred. It also helps to ascertain the actual cost or estimated cost of a job.

(ii) Fixation of selling price: To fix the selling price of a product or service, it is essential
to prepare the cost sheet. It helps in fixing selling price of a product by providing
detailed information of the cost.
Chapter 3:

Q # 1. Distinguish between product cost and period cost.

Answer: The Difference between product cost and period cost are as follow:
Table banana ha :::
Product Cost:
01: Cost identified with goods produced or purchase for resale.
02: Products costs are initially identified as part of the inventory on hand.
Period Costs:
01: Costs that are deducted as expenses during the current period without going through an
inventory stage.
02: Period costs are identified expenses during the current period.

Q # 2. "A variable cost is cost that varies per unit of product, whereas a fixed cost is constant
per unit of product" do you agree? explain.
Answer: No, I do not agree with the above statement.
Fixed costs are costs that remain the same in total but vary per unit when production volume
changes. Facility-level costs, such as rent, depreciation of a factory building, the salary of a plant
manager, insurance, and property taxes, are likely to be fixed costs. Summarizing this cost
behavior, fixed costs stay the same in total but vary when expressed on a per unit basis.
On the other hand, variable costs vary in direct proportion to changes in the production volume
but are constant when expressed as per unit amounts, as production increases, variable costs
increase in direct proportion to the change in volume; as production decreases, variable costs
decrease in direct proportion to the change in volume. Examples include direct material, direct
labor (if paid per unit of output), and other unit-level costs, such as factory supplies, energy
costs to run factory machinery, and so on.
Q # 3. Distinguish between a variable, a fixed cost and a mixed cost.
Answer:
Variable Cost:
Changes in total, in direct proportion to changes in the level of activity. The total cost
increases/decreases as units made increases /decreases. Variable costs is constant if expressed
ion a per unit basis. Direct material, direct labor and variable overhead are all variable costs.
Costs that vary with sales, such as sales commission are variable costs. It is a variable cost if
costs you more if you make or sell one more.
Fixed Costs:
Total costs do not change with changes in the volume of activity (within a relevant range). The
cost per unit will change as the number of units change. Rent, insurance, administrative salaries
are examples of fixed costs. These costs do not change just because you make or sell ne more
unit as long as you stay within the relevant range.
Mixed Costs (sometimes called semi-variable):
03. One that contains both variable and fixed costs elements:
04: Fixed-minimum cost of having a service ready and available for use.
05. Variable-cost incurred for actual consumption of the service.
06. Total Mixed Costs=Total Fixed Cost $ + (Variable Cost $ per activity x # of the activity)
Chapter 4:

Q # 1. What are the techniques of Inventory Control System?

Answer: Techniques of Inventory Control System:
Some of the most important techniques of Inventory Control System are:
1. Setting up of various stock levels.
2. Preparations of inventory budgets.
3. Maintaining perpetual inventory system.
4. Establishing proper purchase procedures.
5. Inventory turnover ratios.
6. ABC analysis.

Q # 2. What is FIFO method? Describe the advantage and disadvantage of FIFO method.
Answer:
First in First out Method (FIFO): Under this method materials are issued out of stock in the
order in which they were first received into the stock. His assumed that the first material to
come into stores will be the first material to be used. CIMA defines FIFO as a method of pricing
the issue of material using, the purchase price of the oldest unit in the stock.

Advantages:
1. It is easy to understand and simple to price the issues.
2. It is good store keeping practice which ensures that raw material leave the stores in a
chronological order based on their age.
3. It is a straight forward method' which involves less clerical cost then other methods of
pricing.
4. This method of inventory valuation is accepted under standard accounting practice.
5. It is consistent and realistic practice in valuation of inventory and finished stack.
6. The inventory is valued at the most recent market prices and it is near to the valuation
based on replacement cost.

Disadvantages:
1. There is no certainty that materials which have been in stock longest will be used, it
they are mixed up with other materials purchased at a later date at different If the price of the
materials purchased fluctuates considerably it involves more clerical work and there is
possibility of errors.
2. In a situation of rising prices, production cost is understood.
3. In-the inflationary market there is a tendency to underpricing of material issues and
deflation market this is the tendency to overprice such issues.
4. Usually more than one price has to be adopted for a single-issue of materials.
5. It makes cost comparison difficult of different jobs when-they are changes with varying
price for the same materials.

Q # 3. What is weighted average method? Describe the advantage and disadvantage of

weighted average method.
Answer: Weight Average: Under this method, issue of materials is priced at the average cost
price of the materials in hand, a new average being computed whenever materials are received.
In. this method, total qualities and total costs are considered while computing the average price
are not the total of rates divided by total number of rates as in simple average.

Advantages:
1. The method is logical and consistent; as it absorbs cost while determining the average
for pricing of material issues.
2. The changes in the prices of materials do not much affect the materials issues and stock.
3. The method follows the concept of total stock and total valuation.
4. Both cost of the materials issued and in stock tend to reflect actual costs.

Disadvantages:
1. Simplicity and conveniences are lost when there is too much change in the prices of
materials.
2. An average price is not based on the actual price incurred, and therefore is not realistic
it follows only arithmetical convenience.

Chapter 5:
Q # 1. What is idle time?
Answer: Generally idle time means that time for which the employer pays, but from which he
obtains no production. Otherwise, it is the difference between the times for which workers are
paid but the workers do not work. So, it is loss to the organization. It can be minimized but,
cannot be controlled during idle time, the workers remain due and contribute nothing towards
production. It is the difference between actual hour and actual hour worked.
There are two types of idle times:

Q # 2. What are the differences between Halsey plan and Rowan plan?
Answer:
The difference between Halsey plan and Rowan plan is given below:
Halsey Plan
(1). The time rate is guaranteed.
(2). 50% bonus on save time is allowed.
(3). It is a normally lower than Rowan plan.
(4). It is more popular to the employers.
(5). It gives higher output in production.

Rowan Plan:
(1). The time rate is also guaranteed here.
(2). Proportional bonus on save time is allowed.
(3). It is a normally higher than Haley Plan.
(4). It is more popular to the employees.
(5). It gives higher efficiency in Production.
Q # 3. What are the two basic methods of remuneration of labor?
Answer: There are two basic methods of labour remuneration, i.e., time rate and piece rate
system of wage payment. In modern days a number of incentive plans to induce workers to
work hard so as to produce more and earn more are being used.

Method # 1. Time Rate System:

Under this system of wage payment, workers are paid according to the time for which they
work. Payment May be on Hourly basis, daily basis, or monthly basis. In this system, no
consideration is given to the quantity of work done.
When Payment is made on hourly basis, total wages payable is calculated as follows:
Wages = No of hours worked x Rate per hour
For example - if a worker is paid at the time of Tk 7.50 per hour, his wages for a day of 8 hours
will be 7.5 x 8 = Tk. 60.
Though this is the oldest system of wage payment, yet it is commonly used these days.
Suitability:
This method of wage is suitable under the following type of situations:
1. Where quality of work is more important than the quantity of work (i.e., high class tailoring)
Chapter 6:

Q # 1. What is Overhead?
Answer:
Overhead is those costs required to run a business, but which cannot be directly attributed to
any specific business activity, product, or service.
Thus, overhead cost does not directly lead to the generation of profits. Overhead is still
necessary, science it provides critical support for generation of profit-making activities. For
example, a high-end clothier must pay a substantial amount for rent (a type of overhead) in
order to be located in an adequate facility for the sale of clothes. The clothier must pay
overhead to create the proper retail environment for its customers.

Q # 2. Describe Overhead Allocation/Distribution, Apportionment and Absorption.

Answer:
1.Cost allocation:
The term ‘allocation’ refers to assignment or allotment of an entire item of cost to a particular
cost center or cost unit. It implies relating overheads directly to the various
departments. The estimated amount of various items of manufacturing overheads should be
allocated to various cost centers or departments. For example- if a separate power meter has
been installed for a department, the entire power cost ascertained form the meter is allocated
to their department. The salary of the works manager cannot be directly allocated to any one
department since he looks after the whole factory. It is, therefore, obvious that many overhead
items will remain unallocated after this step.

2.Aportionment:
Cost Apportionment is necessary when it is not possible to allocate a cost to a specific cost
center. In this case the cost is shared our over two or more cost centers according to the
estimated benefits received by each cost center. As far as possible the basis of apportionment is
selected to reflect this benefit received. For example, the cost of rent and rates might be
apportionment according to the floor space occupied by each cost center.
3.Absorption:
After completing the distribution as stated above the overheads charged to department are to
be recovered from the output product in respective departments. This process of recovering
overheads of a department or any other cost center from its output is called absorption.

Q 3. What are the methods of distribution of service department overhead to production

department? Mention any two methods

Answer:
Direct Method:
The most simple and widely used method of apportionment of overhead. Under direct method
it is assumed that no service department will provide service to other service departments
rather this method allocates each service departments cost directly to the producing
departments.

Related Distribution Method:

Related distribution method; This method is used in those situations where the service
department provide services to the other service department in addition to providing services
to production departments.
Algebraic method
Under this method a set of linear equations have to be solved to apportion the service
department cost the production department. This method is more complex than other
methods. The result derived from the algebraic method is same as result derived from repeated
distribution method.
Chapter 7:
Q 1. Describe the characteristics of contract costing.
Answer:
1. Contract work mainly consists of contraction activities.
2. Contract work is done on the sites unlike manufacturing that is done under a roof and
since the contract is site-based, most of the cost associated with specific contract are direct
cost.
3. Duration of contracts is relatively for a long period.
4. contacts are undertaken to special requirements of the customer.

Q 2. Features of contract costing.

Answer:
Contract costing is one which is used for the works of civil-engineering nature. Here is the list of
some of the features of contract costing -
1. All materials which are used for the purpose of completion of the contract is allocated to the
debit site or charged to contract account.
2.Wages which are paid for the workers employed for the completion of contracts are also
allocated directly to the contract.
3.As far as indirect cost like salaries of engineers, lightening etc...., are concerned it is allocated
on some reasonable basis such as direct labor hours or material used or some other basis which
depend on company-to-company basis.
4. As far as treatment for the machinery used for the completion of contract is concerned, one
can charge the depreciation amount of the machinery for the year to the contracts account.

3. Differentiate between job costing and contract costing.

Answer:
Chapter 8:

Q 1. Define service costing.

Answer:
Service coasting is in used where services are rendered but articles/goods are not produced.
Usually, it refers to the cost procedure used for determining the cost per unit of service
rendered. Operating costing is a variant of unit or output costing. The terminology of CIMA
defines service costing as ''the cost of specific services and functions, e.g., maintenance,
personnel, canteen etc. These may be referred as service centers, departments or functions.

2. The essential features of operating costing.

Answer: