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business
management accounting

Questions and Answers of Management Accounting

The cost accountant of Y Ltd has computed labour turnover rates for the quarter ended March 31, current year as 10 per cent, 5 per cent, and 3 per cent respectively under Flux Method. Replacement
The Managing Director of AII Found Limited is very much perturbed to see that labour turnover is increasing every year. Before taking an appropriate action, he desires to know the profit forgone on
(a) Indicate whether the following statements are true or false.(i) Piece work system of wage payment is good for quality-conscious organizations producing aesthetic products or decorative items.(ii)
What are the costs included in total labour cost besides gross wages?
Explain timekeeping and book keeping and state the detailed records normally maintained under them.
What is idle time? How is it treated in costing of labour?
What is overtime premium? Discuss its treatment in cost accounting and suggest a procedure for its control.
What is labour turnover? How is it measured? What are its costs? How can they be reduced?
What are incentive plans? Describe the main types of incentives plans.
Explain and illustrate the differential price rate schemes type of incentive/bonus plans.
Write notes on the different types of premium bonus plans. Illustrate your answer with examples.
A skilled worker is allowed to take 9 hours to complete a job on daily wages and 6 hours on a scheme of payment by results. His daily rate is ₹75 per hour. The material cost is ₹400 and the
Mr. A is working by employing 10 skilled workers. He is considering the introduction of some incentive scheme — either Halsey Scheme (with 50 per cent bonus) or Rowan Scheme — of wage payment for
From the following data provided to you, find out the labour turnover rate by applying(a) Flux method, (b) Replacement method, and (c) Separation method.Number of workers on the payroll: At the
Your organisation is experiencing a high labour turnover in recent years and management would like you to submit a report on the loss suffered by the Company due to such labour turnover.Following
(a) Indicate whether the following statements are ‘True’ or ‘False’.(i) Factory overheads are direct manufacturing costs.(ii) Indirect labour and indirect materials form part of factory
What do you understand by fixed overheads? Why are they called ‘burdens’?
What two key factors determine the factory overhead application rate for a period? Why are these factors important?
What do you understand by the terms production department and service department? Explain the rationale for allocating the service department costs to production departments. Using your own figures,
(a) Distinguish between cost allocation, cost apportionment and cost absorption, (b) Explain in brief various methods for apportionment of service department’s cost over production departments.
Describe how costs are allocated under the direct method, the step method, and the algebraic method.
What are the five bases commonly used to compute the factory overhead absorption rate and when is each one appropriate to use?
What is meant by absorbed overhead? Under what circumstances will a difference arise between absorbed and actual overheads? How would you dispose of the balance?
What is meant by under/overabsorption of factory overheads? How will you account for them in cost accounts? Does it bear any impact while submitting quotations?
XYZ Ltd. has three production departments (P, Q, and R) and two service departments (X and Y). The following data relate to these departments: Particulars Direct wages Worked hours Value of machine
A company has two production departments and two service departments. The data relating to a period are as under:The power requirement of these departments are met by a power generation plant. The
A manufacturing unit has added a new machine to its fleet of five existing machines. The total cost of purchase and installation of the machine is ₹7,50,000. The machine has an estimated life of 5
The following data pertains to the machine shop of an engineering company, relating to the current year. The machine shop has 3 cost centres A, B, and C, each having 3 distinct set of machines.Work
From the following particulars calculate labour cost per hour:(a) Basic salary, ₹200 per working day(b) Dearness allowance per month, ₹5 per/ every point over 100 cost of living index (current
In the following multiple choice questions, select the correct answers.(i) A company undertakes job-works. Which one of the following is likely to be a variable cost?(a) the wages of workers paid on
Fill in the following blanks.(i) The volume range over which cost relationships are valid is termed as .(ii) Future costs that differ under proposed alternatives are .(iii) Costs that are important
(a) Are all fixed costs sunk costs? Explain.(b) What are opportunity costs? Are opportunity costs relevant in decision-making? Give examples in support of your answer.
(a) “Certain costs are controllable and certain other costs are non-controllable.” This is a meaningless statement unless we define what portion of the organisation is being discussed.
What are the various methods by which you would split semi-variable costs in its fixed and variable elements?
(a) The classification of costs as controllable and non-controllable depends upon a point of reference. Explain.(b) Direct costs and controllable costs are not necessarily the same. Comment.(c) Why
(a) “All future costs are relevant.” Do you agree? Why?(b) “Fixed costs are really variable. The more you produce the less they become.” Do you agree?Explain.
(a) “All controllable costs are direct costs. Not all direct costs are controllable.” Explain with the help of suitable examples.(b) Distinguish between (i) engineered, (ii) discretionary, and
If the price of the material is ₹15 per unit and the annual consumption is 4,000 units, the interest and store-keeping charges are 20 per cent of the value and the cost of placing of an order and
Two components, A and B are used as follows:Calculate for each component: (a) Re-order level, (b) Minimum level, (c) Maximum level, and (d)Average stock level. Normal usage Minimum usage Maximum
The following information pertaining to a firm are available: Annual consumption Cost per unit Cost per order Inventory carrying cost (%) Lead time (maximum, normal and minimum) (days) Daily
Peekay Company Ltd has been buying a given item in lots of 1,200 units which is a six months’supply, the cost per unit is ₹12, order cost is ₹8 per order, and carrying cost is 25 per cent. You
Ganges Pump Company Ltd. uses about 75,000 valves per year and the usage is fairly constant at 6,250 per month. The valve cost of ₹1.50 per unit when bought in large quantities, and the carrying
Precision Engineering Factory Ltd consumes 50,000 units of a component per year. The ordering, receiving and handling cost are ₹3 per order while the trucking costs are ₹12 per order. Further
A customer has been ordering 5,000 special design metal columns at the rate of 1,000 per order during the past year. The production cost is ₹12 a unit–₹8 for materials and labour and ₹4 for
Royal Industries Ltd manufacturers plastic lunch boxes in a moulding process. On an annual basis, the industry manufacturers 1,000 plastic lunch boxes at a cost of ₹4 per unit. The industry’s
IPL Limited uses a small casting in one of its finished products. The castings are purchased from a foundry. IPL Limited purchases 54,000 castings per year at a cost of ₹800 per casting.The
SK Enterprise manufactures a special product “ZE”. The following particulars were collected for the year 2004:Required: (i) Re-order quantity (ii) Re-order level (iii) What should be the
A company manufactures a product from a raw material, which is purchased at ₹60 per kg. The company incurs a handling cost of ₹360 plus freight of ₹390 per order. The incremental carrying cost
“Management accounting is a mid-way between financial accounting and cost accounting.” Elucidate.
Fill in the following blanks(i) The accounting information specifically prepared to aid managers is called _______________ information.(ii) _______________ is the process to ensure that employees
“There are no externally imposed “Generally Accepted Accounting Principles’ for Management Accounting.” In the light of the above statement, discuss, giving illustrations, the nature and
Explain the following:(a) “Management accounting is an extension of financial accounting.”(b) “Management accounting assists in corporate planning process.”
The emphasis of financial accounting is different from that of cost accounting.” Comment.
“Management accounting is the presentation of accounting information in such a way as to assist the management in the creation of policy, and in the day-to-day operation of an undertaking.”
In what essential respects is management accounting different from financial accounting?
(a) “There is no single, unified management accounting system, rather there are three different types of information, each used for different purposes.” Elaborate.(b) Mention the differences
Discuss the three managerial functions in which management accounting information can be used.
What is money measurement concept? State the impact of inflation on the monetary unit assumption.
Describe the accounting principle which explains losses are assets, and profits and capital are liabilities for a business firm.
“Profit and loss account provides only estimated figures of profit earned or loss suffered.” Explain.
“Accrual accounting is superior to cash accounting”. Elaborate.
Name the two major claimants who have claim on the firm’s assets.
List the main elements of balance sheet and income statement.
In preparing balance sheet, would you use the historical cost or current market value while dealing with assets? Explain.
What is the major revenue recognition criterion?
Name the accounting principle involved/violated/affected in the following:(i) The firm changes method of depreciation.(ii) The firm does not consider unused stationery as asset.(iii) The firm follows
Using accounting equation, answer the following independent questions.(i) New company’s assets are ₹250 lakh and its external liabilities are of ₹100 lakh, determine the amount of owners’
Name the 5 major areas in which different accounting policies can be adopted by business enterprises. What is the requirement of the relevant accounting standard in this regard?
Describe in brief the major requirements of accounting standards related to valuation of inventories and depreciation accounting.
What is the criteria of revenue recognition?
Describe in brief disclosure requirements of accounting standards related to accounting for fixed assets and investments.
Explain the concepts of basic earnings per share and diluted earnings per share. How are they computed?
Explain the terms: (i) timing differences, (ii) permanent differences, (iii) deferred tax liability and (iv) deferred tax asset as per accounting standard related to taxes on income.
What is the basis of recognising intangible assets? How are they amortised? What are the major disclosure requirements of accounting standard for such assets?
What is impairment of assets? Is reversal of impairment loss feasible? Explain your answer based on the requirements of accounting standard.
Define provisions, contingent liabilities and contingent assets. State the major requirements of their accounting and disclosure of all the three to conform the needs of accounting standard.
Mr. Ashwin commenced business (in the name of M/s Ashwin Associates) from April 1, 2013 as a garment manufacturer. Following are the transactions for the six months ending September 30, 2013.1.
From the trial balance drawn in P.3.1 and from the following adjustment transactions (a) pass adjustment entries and prepare (b) (i) manufacturing account, (ii) trading account, (iii) P\&L account
(a) Record closing entries for P.3.2 and (b) opening entry as on October 1, 2013 in the books of Aswin Associates.P.3.2From the trial balance drawn in P.3.1 and from the following adjustment
Prepare special journal books from the transactions contained in P.3.1.P.3.1 Mr. Ashwin commenced business (in the name of M/s Ashwin Associates) from April 1, 2013 as a garment manufacturer.
Small Toy Private Limited (STPC) has been manufacturing toys as well as buying from the market since 2001. The owners of the company are satisfied both with its profit margins its reputation in the
Name the steps (in sequence form) involved in the accounting cycle.
Debit implies increase and credit implies decrease. Do you agree with the statement? Explain your answer.
What are nominal, real and personal accounts? Give four examples of each of them.
What is balancing of account? What are the two types of balances? Can a cash account have credit balance?
What is journal? State its two broad categories. Name the five special journal.
What is ledger? State its two broad types. Name three special ledger books.
What is a trial balance? Name the errors disclosed as well as not disclosed by trial balance.
“Trial balance is not a conclusive proof as to the absolute accuracy of books of accounts. It may agree and yet there may be some errors in the books that remain undisclosed.” Elaborate. Give
State the procedure of posting from 4 special journal books to ledger books. Explain the procedure with examples. What is the advantage of writing journal folio and ledger folio numbers?
What are adjustment entries? What is their rationale? Name 5 adjustment items and pass their adjustment entries.
What are closing entries? Why are they needed? Name the type of accounts (a) required to be closed and (b) not required to be closed.
What is an ‘opening entry’? Why is it needed? Pass the opening entry with imaginary figures.
“Double entry implies that transaction is recorded in journal and ledger.” Explain.
Distinguish between the following:(i) Long-term assets and Current assets(ii) Tangible assets and Non-tangible assets(iii) Long-term liabilities and Current liabilities(iv) Gross profit and Operating
What is a manufacturing account? What is its objectives? Prepare a manufacturing account with appropriate imaginary figures.
What is a trading account? What are its major constituents? What is its major outcome?
What is a profit and loss account? Draw its format with as many items as possible.
“While balance sheet is like a snapshot, profit and loss account is like a moving picture.” Explain.
“While interest payment is an expense, dividend payment, in contrast, is not reckoned expense.”Explain.

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