Cost Accounting

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“Cost Accounting Interview Questions and Answers will guide you here that in management accounting, cost accounting establishes budget and actual cost of operations, processes, departments or product and the analysis of variances, profitability or social use of funds. Managers use cost accounting to support decision-making to cut a companies costs and improve profitability. Learn more about cost accounting with Cost Accounting Interview Questions and Answers and get preparation for accounting job”



47 Cost Accounting Questions And Answers

1⟩ What are the variable costs?

Variable costs are those that are directly proportionate with the quantity of production and or directly associated with the service.

Variable costs are the costs that change depending on how many products you sell or how many services you provide.

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3⟩ What is Cost Accounting?

This can be described as the process of accumulating, measuring, analyzing, interpreting and reporting cost information that is both useful and relevant to the internal and external stakeholders of a business entity. External stakeholders are those who have a vested financial interest in a business or company. For example banks (loans), financial houses (mortgages), investors (investments), etc. Internal stakeholders are the business or company directors, managers, division heads, etc.

One of the many benefits of cost accounting is that it turns data into information, knowledge and wisdom about a business entity’s operations that is useful for:

► measuring performance

► reducing or managing costs

► determining the fees or prices for goods and services

► deciding to authorize, modify or discontinue a program or activity

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4⟩ What is difference between cost accounting and financial accounting?

The difference between "cost accounting" and "financial accounting are terms refer to the accounting techniques used internally by a company's management to determine the costs of running the business and help in decision making. For example, reports that compare budgeted to actual expenses are commonly used to monitor the successful management of a specific department or store within a larger enterprise.

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5⟩ What is BEP?

BEP- Break Event Point: It indicates no Loss and no Profit

The level of activity at which, total revenues equal total costs.

A point at which there is no profit and no loss.

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7⟩ What is marginal cost?

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.

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8⟩ What are variable costs?

Variable costs are those that are directly proportionate with the quantity of production and or directly associated with the service.

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11⟩ Define standard cost?

Standard cost has been described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast cost, or a "should be" cost. Standard costs are often a part of a manufacturer's annual profit plan and operating budgets. Standard costs will be established for the following year's direct materials, direct labor, and manufacturing overhead. If standard costs are used, there will be:

★ A standard cost for each unit of input (e.g., $30 per hour of direct labor)

★ A standard quantity of each input for each unit of output (e.g., 3 hours of labor for each product)

★ A standard cost for each unit of output (e.g., $30 X 3 hours = $90 of direct labor per product)

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12⟩ Explain relevant range in cost accounting?

Relevant range refers to a limited span of volume or activity. To illustrate, let's assume that a manufacturer's monthly production volume is consistently between 10,000 and 13,000 units and between 20,000 and 25,000 machine hours. Within this range of activity it operates smoothly with the same amount of monthly fixed costs (say $200,000) for supervisors, rent, depreciation, etc. If the volume were to drop below this range, the company would reduce the number of supervisors, the space rented, etc. so that its total monthly fixed costs would be smaller. If the volume exceeds the range, the company would incur additional fixed costs for more supervisors, space, etc. Hence, this company's relevant range of activity is 10,000 to 13,000 units of product or 20,000 to 25,000 machine hours. It is only in this relevant range that the monthly fixed costs are $200,000.

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13⟩ What is chargeback?

A process in the industry where a wholesaler requests an amount that is the difference between the manufacturer's price to the wholesaler and the contract price to the resale customer.

The actual chargeback occurs when the wholesaler sells the manufacturer's product at contract price that is below wholesaler acquisition cost (WAC).

Especially evident in pharmaceutical industry.

In electronic commerce, a charge back is a reversal of a credit card transaction, which is usually initiated by the card issuer as requested by the cardholder. It may also be requested by the merchant. Charge backs usually occur due to fraudulent activity on the card (real or perceived), due to customer disputes, or from other authorization issues.

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14⟩ What are fixed costs?

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.

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15⟩ What is CMM?

CMM is an internationally recognized standard for measuring the maturity of an organization's software development processes and has become the primary benchmark multinational corporations use to judge IT service providers ' abilities to deliver high quality software. Bleum is now one of only a few companies in China to be assessed SEI CMM Level 5.

The Capability Maturity Model (CMM) was developed under the guidance of the Software Engineering Institute (SEI) of Carnegie Mellon University in the U.S. It is organized into five maturity levels with SEI CMM Level 5 being the highest. By operating at this high a CMM level, customers ' benefit from Bleum's ability to consistently deliver high quality software on schedule, which ultimately results in a lower total cost of software ownership due to less rework and easier maintenance.

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16⟩ Explain the information about cost sheets?

Cost sheet consists of the direct and indirect expenses incurred in producing a given product and classifying the expenses incurred according to office, administration, selling and distribution overheads.

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17⟩ What is CMMI?

Capability Maturity Model Integration (CMMI) is a process improvement approach that provides organizations with the essential elements of effective processes.

It can be used to guide process improvement across a project, a division, or an entire organization. CMMI helps integrate traditionally separate organizational functions, set process improvement goals and priorities, provide guidance for quality processes, and provide a point of reference for appraising current processes.

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18⟩ What is the marginal cost?

Marginal Cost (MC):

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 EconModel 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.

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20⟩ Define simple linear regression analysis?

Simple linear regression analysis is a statistical tool for quantifying the relationship between just one independent variable (hence "simple") and one dependent variable based on past experience (observations). For example, simple linear regression analysis can be used to express how a company's electricity cost (the dependent variable) changes as the company's production machine hours (the independent variable) change.

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