Cost & Management Accounting (VV2)

Cost & Management Accounting (VV2)
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1 . Batla Ltd. is currently preparing its cash budget for the year to 31 March 2014. An extract from its sales budget for the same year shows the following sales values. Rs
March 60,000
April 70,000
May 55,000
June 65,000
40% of its sales are expected to be for cash. Of its credit sales, 70% are expected to pay in month after sale and take a 2% discount. 27% are expected to pay in the second month after the sale, and the remaining 3% are expected to be bad debts. The value of sales budget to be shown in the cash budget for May 2013 would be how much?
2 . A company manufactures 5,000 units of a product per month. The cost of placing an order is 100. Purchase price of the raw material is 10 per kg. Average consumption of raw material is 275 kgs. per week. The carrying cost of inventory is 20% per annum. Calculate economic order quantity?
3 . What is a ‘cost plus contract’? What are its disadvantages ?
4 . What remedial measures would you suggest to minimize the labour turnover ?
5 . Explain ABC analysis and Economic Order Quantity (EOQ) techniques of inventory control?
6 . Why the flexible budgets are considered superior to the fixed budgets ?
7 . Distinguish between ‘job costing’ and ‘contract costing’?
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Case Detail :
Accounting Adds Up to a Challenging and Rewarding Career
What factor do many of the nation’s top CEOs, government leaders and most influential business advisers have in common? Many of them launched their careers with a degree in accounting. That’s right – accounting.
The popular stereotype of the accountant is the solitary “bean counter” who quietly works behind the scenes recording financial transactions and balancing the books. The reality is that accountants are on the front lines helping businesses succeed, keeping cities and states running, and protecting the financial health and security of organizations and individuals.
Accountants are responsible for maintaining an organization’s financial records and protecting its assets which requires strict adherence to accounting rules, tax codes and regulations as well as the ability to analyze data, question assumptions and resolve discrepancies. In addition to being comfortable working with numbers, accountants must be good with words; they must be able to read business documents critically and make compelling presentations. Given the sensitive nature of the financial information being handled, personal integrity, honesty and the highest standard of ethics are essential.
The accounting profession offers a variety of career paths. Many accountants work within public accounting firms, which can range from large, multinational firms to local accounting practices. Within the firm, accountants can specialize in areas such as audit, tax and management consulting as well as serve a range of industries and clients. On the corporate side, careers are available in businesses of all sizes, working in areas including financial accounting and reporting, financial management and information systems. Accountants, especially those certified in Forensic Accounting, are also in demand at the FBI and the Treasury Department where they work with investigators to track down accounting fraud.
Pursuing a college degree in accounting requires a strong personal commitment, persistence, and hard work. All states require students to complete 150 credit hours to obtain a state license for the CPA, which is 30 hours more than the usual four-year bachelor’s degree.
1. What’s the issue in the case?
2. What are the responsibilities of accountants?
3. What are the essentials to become a good accountant?
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1. ABC technique refers to ………….. based costing.
Average
Abnormal
Activity
Absorption
2. The fixed cost which cannot be avoided during the temporary closure of a plant is known as …………… cost.
Closure
Shutdown
Break down
Stoppage
3. Any factor that causes a change in the cost of an activity or output. Forexample, the quality of parts received by an activity, or the degree of complexity of tax returns to be reviewed.
Cost Absorption
Cost Verification
Cost allocation
Cost Driver
4. The cost which varies with the level of production is called …………….. Cost.
Moving
unstable
Variable
Fixed
5. Profit centres whose expenditure are reported on amarginal cost basis, are called ……………….. centres.
Contributors
Average
Deposit
Subsidised
6. ICWA stands for The Institute of Cost and …………….. Accountants.
Waste
Works
Weightage
Weblink
7. It is the process of absorbing the overhead costs (indirect costs)allocated to or apportioned over a particular cost centre.
Cost Consumprion
Cost Absorption
Cost Verification
Cost allocation
8. ………………. cost represents the indirect cost which is incurred for seekingto create and stimulate demand and securing orders.
Buying
Procurement
Selling
Opportunity Cost
9. It is the cost incurred for converting the raw material intofinished product
Average
Deposit
Subsidised
Conversion
10. Sales minus total cost is called ………………. .
Margin
Profit
Contribution
EBIT
11. They have the capacity of contributing to the production of therevenue in the future.
Cost Absorption
Cost Verification
Unexpired Cost
Conversion Cost
12. Any segment or element for which cost information is desired is known as ……………. Object.
Cost
Margin
Profit
Contribution
13. Committed resources or Resources that generate cost based on the amount acquired rather than the amount used such as Buildings and equipment are termed as ………….. Related resource.
Goodwill
Capacity
Asset
Production
14. ………….. products are a sub-category of joint products that have relatively insignificant sales values as a proportion of the value of the entire group from which they are derived.
Associated
Sub
By
Subsidised
15. Cost of an activity that is required or performed each time a batch of products or services is produced is called ……………. Level cost.
Original
Net
Unit
Batch
16. The cost of testing and inspecting both the materials and finished products is ………………. Cost.
Marginal
Appraisal
Appreciation
Unit
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17. Cost of one more item, unit or customer.
Appraisal
Appreciation
Unit
Incremental
18. Can be increased or decreased at the discretion of the decision maker.
Appraisal
Appreciation
Unit
Discretionary
19. After making deductions.
Net
Gross
Actual
Factual
20. Unstated and unrecorded cost is also called ………………. Cost.
Explicit
Implicit
Unit
Incremental
21. Combination of budgeted profit and loss account, cash flow statement and balance sheet, created from detailed budgets brought together within a finance plan is ………………. Budget.
Actual
Master
Real
Combined
22. Investment projects that are competing for scarce resources, where choosing one eliminates another.
Explicit
Mutually Inclusive
Mutually Exclusive
Implicit
23. FIFO stands for First in ………… out.
First
Fast
Foremost
Feasible
24. One which is not capable of being regulated by a manager within a defined boundary of responsibility, although it may be a cost incurred so that the responsibility may be exercised.
Controllable
Adjustable
Fixed
Non-controllable
25. The cost difference expected if one course of action is adopted instead of others is called ……. Cost.
Differential
Common
Unit
Motivated
26. In the month of January, 300 labour hours were worked for a total cost of Rs 4800. The variable overhead expenditure variance was Rs 600 (A). Overheads are assumed to be related to direct labour hours of active working. What was the standard cost per labour hour?
14
16
18
34
27. An activity, output, or item whose cost is to be measured.
Cost Budgeting
Cost Audit
Cost Suspension
Cost Object
28. It is a fixed cost which results from decisions of prior period andis not subject to managerial control in the present.
Absolute
Absorption
Administratrive
Committed
29. A liability that is expected to be repaid within a short period of time say 9 or 12 months.
Capital Liability
Net Liability
Current Liability
Fixed Liability
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30. The way of describing and analysing the sequence of activities that bring on product/service from initial stage of production to final stage of delivery.
Task determination
Rationing
Value Chain
budgeting
31. ………….. Cost is associated with an activity that would not be incurred if the activity were not performed.
Rejected
Accepted
Avoidable
Suspended
32. …………… activity is performed each time a product is produced.
Marginal
Unit
Fixed
Variable
33. It is the indirect cost pertaining to the administrative function which involves formulation of policies, directing the organisation and controlling the operations of an undertaking is …………. Cost.
Abnormal
Absolute
Absorption
Administratrive
34. The sales of a business or other form of revenue from operations of the business.
Profit
Contribution
Turnover
Margin
35. Any materials that have no value.
Waste
Junk
Both
None
36. An agenda, layout, blue print or a plan setting out the actions and resources needed to achieve a stated objective of the long-term plan.
Consideration
Strategy
Thinktank
Planning
37. It is the total cost of any product or process. For e.g.: in a costsheet, both absolute cost and cost per unit are depicted.
Average
Abnormal
Absolute
Absorption
38. A fixed cost which increases in steps over a period of several years.
Absolute
Absorption Cost
Budgeted
Step Cost
39. The amount of work achievable, at standard efficiency levels, in one hour.
Standard Hour
Non-Standard Hour
Fixed Hour
Incremental Hour
40. Those future costs which will be affected by a decision to be taken are ………….. Costs.
Relevant
Irrelevant
Incremental
Judgemental
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