Cost Accounting Basics: Top 15 Question & Answers

Q.1. What do you mean by Cost?

Answer – Cost means the amount of expenditure incurred upon manufacturing of an article or providing any service.

Q.2. What do you understand by Costing?

Answer – costing is the technique and process of ascertaining the cost.

Q.3. What is meant Cost Accounting?

Answer – Cost accounting is the provision of such analysis and classification of the expenditure as will enable to ascertain the total cost of any particular unit of production.

Q.4. What is the opportunity cost or define opportunity cost?

Answer – The value of the alternatives forgone by employing resources in a specific manner is known as opportunity cost.

Q.5. What is Absorption Costing?

Answer – It is the technique to charge all fixed and variable expenses pertaining to product, process or job. 🙂

Q.6. Define uniform costing?

Answer – It is the adoption of the uniform method of cost accounting by a number of units of the industry to ascertain cost.

Q.7. Differentiate between Cost and Costing?

Answer – Cost means the amount of expenditure incurred upon manufacturing of an article for providing any service while Costing is the technique and process of ascertaining cost.

Bonus: 18 Major Factors Affecting Capital Structure (Complete List).

Q.8. Explain Cost Unit?

Answer – Cost unit is a certified measurement of any goods or service like per ton, per km, per passenger km.

Q.9. What do you mean by Cost Centre?

Answer – The cost center is a location, person or item of equipment which are connected with an understanding of which costs are ascertained.

Q.10. What is the difference between Cost Unit and Cost Centre?

Answer – Cost unit is a unit of quantity of product, service in relation to cost ascertainment while cost center is related to the particular department, location, person or item of equipment etc. Of an enterprise and object to control over cost.

Q.11. Name four methods of Costing?

Answer –

Q.12. Give different Techniques of Costing?

Answer – Techniques of cost accounting are:

Historical costing.
standard costing.
uniform costing.
estimated costing.
marginal costing.
absorption costing.
batch costing.
cost plus method.
Departmental costing method.

Q.13. What is the main object of Cost Accounting?

Answer – The main objectives of cost accounting are as follows:

Determination of cost.
cost control and cost reduction.
helpful in the determination of policy.
helpful in decision making.
furnishing all cost information.
compliance with statutory requirements.

Q.14. What are the Advantages of Cost Accounting?

Answer – The advantages of cost accounting for different sectors are as under:

Advantages to the manufacturer:

The control over material and stock.
Control over labour.
Control over overheads.
To maintain plants or machinery efficiently.
Provide assistance in production policy.
To have knowledge regarding profitable and unprofitable activities.

Advantages of administration

To know the performance of different departments.
Provide information on profit or loss.
Assistance in the cost of control.
Optimum use of resources.
Helpful in decision making and policy farming.

Advantages in the area of Sales

Determination of proper selling price.
Helpful in the determination of tender price.
Control over selling prices expenses.
Measurement of the efficiency of the sales department and salesman.

Q.15. What are the Disadvantages of Cost Accounting?

Answer – Following are the demerits of cost accounting:

It is an expensive as it required the employment of cost accountant and ancillary staff.
It is unnecessary because mere adoption of cost accounts never control cost.
An unnecessary increase in work.
Incomplete and unreliable because estimates are used and some items of income and expenditure are not accounted for.
Useless in the determination of selling price because selling price or not based upon cost in this competitive era.
Not suitable for small industries, agricultural areas etc.