Cost Accounting Interview Questions and Answers
Question - 41 : - What Are Variable Costs?
Answer - 41 : -
Variable costs are those that are directly proportionate with the quantity of production and or directly associated with the service.
Question - 42 : - What Is Marginal Cost?
Answer - 42 : -
The marginal cost of an additional unit of output is the cost of the additional inputs needed to produce that output. More formally, the marginal cost is the derivative of total production costs with respect to the level of output.
Marginal cost and average cost can differ greatly. For example, suppose it costs $1000 to produce 100 units and $1020 to produce 101 units. The average cost per unit is $10, but the marginal cost of the 101st unit is $20
The Econ Model applications Perfect Competition and Monopoly emphasize the roles of average cost and marginal cost curves. The short movie Derive a Supply Curve (40 seconds) shows an excerpt from the Perfect Competition presentation that derives a supply curve from profit maximizing behavior and a marginal cost curve.
Question - 43 : - Explain Cost Sheet?
Answer - 43 : -
Cost sheet is a statement of cost for a product for given period of time.
Question - 44 : - What Is The Difference Between Cost Accounting And Financial Accounting?
Answer - 44 : -
One of the basic differences cost accounting is helpfully in controlling the cost of production whereas financial accounting is concerned is helpfully in determining financial position of a concern .
Question - 45 : - What Are Fixed Costs?
Answer - 45 : -
- The costs that are fixed irrespective of production are fixed costs. EX: Rent, Depreciation.
- Fix cost is those cost who not change in any time whether the production done or not it similar charge in every organization ex- salary of labor, supervisor factory rent insurance etc.
Question - 46 : - How do you define the term Cost Accountancy ?
Answer - 46 : - The Institute of Cost and Works Accountants of the U.K. has defined Cost Accountancy as the “application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and ascertainment of profitability as well as presentation of information for the purpose of managerial decision taking. So, the term Cost Accountancy is used in a broader sense. It embraces costing, cost accounting, cost control, cost audit and budgetary control”.
Question - 47 : - State the three most important need for Cost Accounting ?
Answer - 47 : -
Ascertainment of cost of product: Product cost is ascertained through the mechanism of cost accounting. For this purpose, various costing methods are applied.
2. Determination of selling price: A business unit is required to determine the selling price at which its products are to be sold. In doing so, a unit should fix up the selling price for its products in such a way so that the costs of the product are recovered. Moreover, in fixing selling prices, regard must be had to the cost structure, conditions of the market, types of consumers and the demand and supply of the product.
3. Analysis and classification of cost of production: Cost Accounting helps to analyse and classify various items of cost incurred which lead to the revelation of various forms of waste, whether of materials, time or expense. Analysis of the causes of unsatisfactory results may suggest possible remedial measures to attain efficiency in the utilisation of resources.
Question - 48 : - What is the role of Cost Accounting in Price Determination ?
Answer - 48 : - Cost Accounting helps management in making revenue decisions like pricing new products or reducing or increasing the price of a product. It also helps the management in taking short-term and long-term product mix decisions. Cost data also helps the management in achieving the best combination of factors being used in the business enterprises.
Cost data assists the management in making sound decisions like reducing price, increasing the volume of sales, increasing the price or improving turnover. In fact, the problem of properly regulating prices and output is largely dependent upon a knowledge of production, distribution and administrative costs per unit of product or of service.
Answer - 49 : -
(i) The cost accounting system provides data about profitable and unprofitable products or activities. By studying and interpreting cost data, the management can take corrective measures to improve the profitability of the concern.
(ii) Production methods may be changed or improved so that costs can be controlled to increase profits.
(iii) Cost data helps the management in minimising the loss and wastages
(iv) Cost data and information are provided to the management to determine the price of the product.
(v) Cost data can be compared with the standard costs by the introduction of standard costing. Inter-firm comparisons will enable the management to study the causes of unfavorable developments and to institute procedures for their elimination.
(vi) Inefficiencies in plant operation are very costly. The inefficiencies do occur due to wastage of materials, use of obsolete machinery and wrong man power planning. Proper use of cost accounting may remove these inefficiencies.
(vii) Cost accounting helps the management in knowing the costs of different alternatives and selecting the most advantageous course of action. Decisions like produce or buy, continue or drop a product, operate or shut down, etc. and other short-term decisions can be made easily with the help of cost accounting data.
Answer - 50 : - Cost Accountancy is an art which has developed in course of time through theories and practices. The theories are based on reasoning and practical experience of cost accountants. Many of the theories have been recognised and accepted in due course of time. So, the accepted theories have grown up through changes to be recognised as conventions.
It is not a full proof system. Cost Accountancy is not regarded as an exact science in the sense that accepted principles of cost accounting still keep on changing with the passage of time. It suffers, like any other branch of accounting, from some limitations.
1. Lack of uniformity:
The greatest limitation of cost accounting is its failure to conform to any uniform procedure. No cost can be said to be exact as they involve a large number of conventions and flexible factors like, materials issue pricing based on FIFO, LIFO, Average or Standard costs; arbitrary allocation of overheads to cost centres; arbitrary allocation of joint costs; adoption of Marginal costs and Standard costs etc.
2. Large number of conventions:
The existence of a large number of conventions and practices in regard to the valuation of stocks, materials issued to different cost centres, apportionment of joint costs stands in the way of finding out ‘time cost’ of a product. Cost—as ascertained by the application of costing principles—is not a true cost but an estimate.
3. Applicability:
In small and medium sized industries, it becomes impractical to introduce costing since it becomes too expensive for the unit.