Best Choice..Easy Service..High Value: MGT 402 Cost & Management Accounting Solved MCQ'S

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BEST CHOICE..EASY SERVICE..HIGH VALUE

MGT 402
COST & MANAGEMENT ACCOUNTING
SOLVED MCQS
In a repeated distribti!n "et#!d$
Se%e&t &!rre&t !pti!n$

Ea&# ser'i&e depart"ent in trn d!es n!t re(a%%!&ate its &!sts t! a%% depart"ents
Each service department in turn and re-allocates its costs to all
departments
Ea&# ser'i&e depart"ent in trn and a%%!&ates its &!sts t! a%% depart"ents
On%) !ne ser'i&e depart"ent in trn and re(a%%!&ates its &!sts t! a%% depart"ents*

+epeated distribti!n "et#!d$
T#is "et#!d ta,es ea&# ser'i&e depart"ent in trn and re(a%%!&ates its &!sts t!
a%% depart"ents -#i&# bene.it*

T#e di..eren&e !'er t#e peri!d !. ti"e bet-een a&ta% and app%ied /O0 -i%%
sa%%) be "ini"a% -#en t#e predeter"ined !'er#ead rate is based !n$

Normal capacity
Desi1ned &apa&it)
Dire&t Lab!r #!rs
Ma&#ine #!rs

T#e &!st !. 1!!ds s!%d -as +s* 2402000* 3e1innin1 and endin1 in'ent!r)
ba%an&es -ere +s* 202000 and +s* 4020002 respe&ti'e%)* 5#at -as t#e in'ent!r)
trn!'er6

7*0 ti"es
82*0 ti"es
9*0 ti"es
9.6 times

3) sin1 tab%e "et#!d -#ere(((((((((((((((( is e:a%2 t#at p!int is &a%%ed E&!n!"i&
!rder :antit)*

Orderin1 &!st
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Carr)in1 &!st
Ordering and carrying cost
;er nit !rder &!st

A &!st nit is

T#e &!st per #!r !. !peratin1 a "a&#ine
T#e &!st per nit !. e%e&tri&it) &!ns"ed
A unit of product or services in relation to which costs are ascertained
A "easre !. -!r, !tpt in a standard #!r

L!ss b) .ire is an e<a"p%e !.$

Normal Loss
Abn!r"a% L!ss
In&re"enta% L!ss
Can n!t be deter"ined

T#e "ain prp!se !. &!st a&&!ntin1 is t!

Ma<i"i=e pr!.its
0e%p in in'ent!r) 'a%ati!n
Provide information to management for decision maing
Aid in t#e .i<ati!n !. se%%in1 pri&e

I.2 Sa%es > +s* ?002000 Mar,p > 20@ !. &!st 5#at -!%d be t#e 'a%e !. Gr!ss
pr!.it6

+s* 2002000
!s. "##$###
+s* A702000
+s* 9402000

Gr!ss pr!.it > Sa%es Babs!%te a"!ntC < 20@D820@

5#ere t#e app%ied /O0 &!st is %ess t#an t#e a&ta% /O0 &!st it is$
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%nfavora&le variance
/a'!rab%e 'arian&e
N!r"a% 'arian&e
3d1eted 'arian&e
Varian&e
5#en t#e app%ied &!st is %esser t#an t#e a&ta% &!st it is n.a'!rab%e 'arian&e*

5#i&# !. t#e .!%%!-in1 is &!rre&t6

%nits sold'Opening finished goods units ( %nits produced ) *losing
finished goods units
Units S!%d > Units pr!d&ed E C%!sin1 .inis#ed 1!!ds nits ( Openin1 .inis#ed
1!!ds nits
Units s!%d > Sa%es E A'era1e nits !. .inis#ed 1!!ds in'ent!r)
Units s!%d > Sa%es ( A'era1e nits !. .inis#ed 1!!ds in'ent!r)

5#i&# !. t#e .!%%!-in1 ite"s !. e<pense are t! be add in /O0 &!st

+ent !. .a&t!r) E 0ead !..i&e rent E sa%aries t! .a&t!r) -at&#"an
+ent !. .a&t!r) E .a&t!r) %i1#tin1 bi%% E Dire&t!rs sa%aries
!ent of factory ( factory lighting &ill ( +actory employees salaries
0ead !..i&e rent E /a&t!r) pr!pert) ta< E /a&t!r) s"a%% t!!%s

I.2 Gr!ss pr!.it > +s* 402000 G; Mar1in > 20@ !. sa%es 5#at -i%% be t#e 'a%e !.
&!st !. 1!!ds s!%d6

!s. "6#$###
+s* 8202000
+s* 402000
+s* F02000

C!st !. 1!!ds s!%d > Gr!ss pr!.it Babs!%te a"!ntC < 70@D20@

Ta,in1 steps .!r t#e .res# pr&#ase !. t#!se st!&,s -#i&# #a'e been e<#asted
and .!r -#i&# re:isiti!ns are t! be #!n!red in .treG is an eas) e<p%anati!n !.$

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O'erst!&,in1
Under st!&,in1
!eplenishment of stoc
A&:isiti!n !. st!&,

Net In&!"e be.!re Interest and ta< is a%s! &a%%ed$

Operating ,ncome-Profit
Gr!ss ;r!.it
Mar1ina% In&!"e
Ot#er In&!"e

5#i&# !. t#e .!%%!-in1 is indire&t &!st6

T#e depre&iati!n !. "a&#iner)
T#e !'erti"e pre"i" in&rred at t#e spe&i.i& re:est !. a &st!"er
T#e #ire !. t!!%s .!r a spe&i.i& H!b
All of the given options

In -#i&# !. t#e .!%%!-in1 &enter /O0 &!st NOT in&rred

;r!d&ti!n Center
Ser'i&e Center
Genera% C!st Center
.ead Office

5#i&# !. t#e .!%%!-in1 is &!nsidered as basi& s)ste"s !. re"neratin1 %ab!r6

Ti"e rate s)ste"
;ie&e rate s)ste"
0a%se) ;re"i" p%an
/oth time rate and piece rate system

Net sa%es > Sa%es %ess$

Sa%es retrns
Sa%es dis&!nts
Sa%es retrns & a%%!-an&es
0ales returns 1 allowances and sales discounts

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An !r1anistati!n s!%d nits 4000 and #a'e &%!sin1 .inis#ed 1!!ds 4A00 nits and
!penin1 .inis#ed 1!!ds nits -ere 8000*T#e :antit) !. nit pr!d&ed -!%d be$

9A00 nits
62## units
4A00 nits
7A00 nits
Units pr!d&ed > Units s!%d E C%!sin1 .inis#ed 1!!ds nits ( Openin1 .inis#ed
1!!ds nits

A st!re %ed1er &ard is si"i%ar t! t#e IIIIIIII *

St!&, %ed1er
/in card
Materia% &ard
;r&#ase re:siti!n &ard

5#i&# !. t#e .!%%!-in1 e%e"ent "st be ta,en int! a&&!nt -#i%e &a%&%atin1 t!ta%
earnin1s !. a -!r,er nder di..erent in&enti'e -a1e s&#e"es6

+ate per nit
%nits of production
E<tra ti"e ta,en b) e"p%!)ee t! &!"p%ete t#e pr!d&ti!n
N"ber !. -!r,ers e"p%!)ed

T#e H!rna% entr) !. pr&#ase !. st!&, nder peri!di& in'ent!r) s)ste" -!%d
be6

In'ent!r) t! Cas#
Cas# t! ;r&#ases
;r&#ases t! In'ent!r)
None of the given options

C%!sin1 -!r, in pr!&ess In'ent!r) !. %ast )ear$

,s treated as Opening inventory for current year
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Is n!t &arried .!r-ard t! ne<t )ear
3e&!"e e<pense in t#e ne<t )ear
C#ar1e t! ;r!.it & L!ss a&&!nt

T#e /I/O in'ent!r) &!stin1 "et#!d B-#en sin1 a perpeta% in'ent!r) s)ste"C
ass"es t#at t#e &!st !. t#e ear%iest nits pr&#ased is a%%!&ated in -#i&# !. t#e
.!%%!-in1 -a)s6

/irst t! be a%%!&ated t! t#e endin1 in'ent!r)
Last t! be a%%!&ated t! t#e &!st !. 1!!ds s!%d
Last t! be a%%!&ated t! t#e endin1 in'ent!r)
+irst to &e allocated to the cost of good sold

Sa%es are +s* 4A02000* 3e1innin1 .inis#ed 1!!ds -ere +s* 242000* Endin1
.inis#ed 1!!ds are +s* 402000* T#e &!st !. 1!!ds s!%d is +s* 4002000* 5#at is
t#e &!st !. 1!!ds "an.a&tred6

+s* 4242000
+s* 4402000
+s* 2F42000
None of the given options

5#i%e transp!rtin1 petr!%2 a %itt%e :antit) -i%% be e'ap!ratedJ s&# ,ind !. %!ss is
ter"ed as$

Normal Loss
Abn!r"a% L!ss
It is in&re"enta% %!ss
It &an n!t be abn!r"a% %!ss

T#e &!st !. e%e&tri&it) bi%% !. t#e .a&t!r) is treated as$

/i<ed &!st
Variab%e &!st
Step &!st
0emi varia&le cost

Se"i Variab%e C!st
It is a%s! ,n!-n as "i<ed &!st* It is t#e &!st -#i&# is part .i<ed and par 'ariab%e* It
is in .a&t t#e "i<tre !. b!t# be#a'i!rs*
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E<a"p%es in&%de$ Uti%it) bi%%s K t#ere is a .i<ed %ine rent p%s &#ar1es .!r nits
&!ns"ed*
Sa%es"ans sa%ar) K t#ere is a .i<ed "!nt#%) sa%ar) p%s &!""issi!n per nits
s!%d*

A &!st &entre is

A unit of product or service in relation to which costs are ascertained
An a"!nt !. e<penidre attribtab%e t! an a&ti'it)
A pr!d&ti!n !r ser'i&e %!&ati!n2.n&ti!n2a&ti'it) !r ite" !. e:ip"ent .!r -#i&#
&!sts are a&&"%ated
A &entre .!r -#i&# an ind'ida% bd1et is dra-n p

C!st a&&!ntin1 depart"ent prepares IIIIIIIIIII t#at #e%ps t#e in preparin1
.ina% a&&!nts*
C!st s#eets
*ost of goods sold statement
C!st !. pr!d&ti!n +ep!rt
Materia% re:isiti!n .!r"

5#en /O0 is nder app%ied and &#ar1ed t! Net pr!.it 2 t#e treat"ent -!%d be$
%nder applied Add net profit
Under app%ied Less net pr!.it
Under app%ied Less !peratin1 e<pense
N!ne !. t#e 1i'en !pti!ns

A -!r,er is paid +s* 0*A0 per nit and #e pr!d&es 87 nits in 9 #!rs* Leepin1
in 'ie- t#e pie&e rate s)ste"2 t#e t!ta% -a1es !. t#e -!r,er -!%d be$
87 < 9 < 0*A0 > +s* ?4
"3 4 #.2# ' !s. 9
87 < 9 > +s* 82?
9 < 0*A > +s* 4*A

Units pr!d&ed < +ate per nit*

5ei1#ted a'era1e &!st per nit is &a%&%ated b) -#i&# !. t#e .!%%!-in1 .!r"%a6
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C!st !. 1!!ds issedDn"ber !. nits issed
5otal cost-total units
C!st !. 1!!ds "an.a&tredD&%!sin1 nits
C!st !. 1!!ds s!%dDt!ta% nits

5ei1#ted a'era1e rate per nit >T!ta% C!stDT!ta% Units

3)er pr!d&ed 202000 nits and t#eir t!ta% .a&t!r) &!st -as +s* 4A020002!t#er
&!st %i,e pr!pert) ta< !n .a&t!r) bi%din1 -as +s* 802000 in&%ded in t#at &!st ti%%
)ear ended t#e &!st !. per nit -!%d be$

!s.66.2
+s*24*A
+s*24*A
+s*2?*A

C!st per nit > C!st !. 1!!ds "an.a&tred D N"ber !. nits "an.a&tred

A standard rate is paid t! t#e e"p%!)ee -#en #e &!"p%eted #is H!b$

In ti"e %ess t#an t#e standard
,n standard time
In ti"e "!re t#an standard
3!t# in standard ti"e and "!re t#an t#e standard ti"e

St!re in&#ar1e a.ter re&ei'in1 t#e "ateria% as per t#e 1!!ds re&ei'ed n!te2
p%a&es t#e "ateria% at its %!&ati!n and "a,es an entr) inIIIIIII *

/in *ard
St!re Led1er Card
St!&, Led1er

EOQ is a p!int -#ere$

Ordering cost is e7ual to carrying cost
Orderin1 &!st is #i1#er t#an &arr)in1 &!st
Orderin1 &!st is %esser t#an t#e &arr)in1 &!st
T!ta% &!st is "a<i""

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I. !penin1 in'ent!r) !. "ateria% is +s*202000 and &%!sin1 in'ent!r) is +s*
402000*t#e A'era1e in'ent!r) a"!nt -i%% be$

+s* 402000
!s. 8#$###
+s* 202000
+s* 802000

A'era1e In'ent!r)> Openin1 In'ent!r) E C%!sin1 In'ent!r)D2

A &!"pan) #as &a%&%ated t#at '!%"e 'arian&e .!r a 1i'en "!nt# -as
n.a'!rab%e* T#is &!%d #a'e been &ased b) -#i&# !. t#e .!%%!-in1 .a&t!rs6

T#e n"ber !. reHe&ted nits -as #i1#er t#an n!r"a%
Ma&#ine brea,d!-ns -ere #i1#er t#an n!r"a%
De%a)s -ere e<perien&ed in t#e issin1 !. "ateria% t! pr!d&ti!n

;VC C!"pan) #as !rderin1 :antit) 802000 nits* T#e) #a'e st!ra1e &apa&it)
202000 nits2 t#e a'era1e in'ent!r) -!%d be$

202000
2$###
802000
2A2000

A'era1e !rderin1 :antit)> Orderin1 Qantit)D2

I.2 Gr!ss pr!.it > +s* 402000 G; Mar1in > 2A@ !. sa%es 5#at -i%% be t#e 'a%e !.
&!st !. 1!!ds s!%d6
+s* 8?02000
!s. "6#$###
+s* 402000

C!st !. 1!!ds s!%d> 40000 M *9A D *2A

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A%% Indire&t &!st is &#ar1edDre&!rd in t#e #ead !.

;ri"e &!st
+O. cost
Dire&t %ab!r &!st

UnderDO'er app%ied /O0 &!st &an be adHsted in -#i&# !. t#e .!%%!-in1$

Entire ;r!d&ti!n
C!st !. G!!d s!%d
Net ;r!.it
All of given options

T#e /I/O in'ent!r) &!stin1 "et#!d B-#en sin1 a perpeta% in'ent!r) s)ste"C
ass"es t#at t#e &!st !. t#e ear%iest nits pr&#ased is a%%!&ated in -#i&# !. t#e
.!%%!-in1 -a)s6

/irst t! be a%%!&ated t! t#e endin1 in'ent!r)
Last t! be a%%!&ated t! t#e &!st !. 1!!ds s!%d
Last t! be a%%!&ated t! t#e endin1 in'ent!r)
+irst to &e allocated to the cost of good sold

T#e dan1er Le'e% &an be &a%&%ated6

Average consumption 4 Lead time to get urgent supplies
N!r"a% &!ns"pti!n < Lead ti"e t! 1et r1ent spp%ies
Ma<i"" &!ns"pti!n < Lead ti"e t! 1et r1ent spp%ies
Mini"" &!ns"pti!n < Lead ti"e t! 1et r1ent spp%ies

Dan1er Le'e% > A'era1e &!ns"pti!n < E"er1en&) ti"e

5#i&# !. t#e .!%%!-in1 is &!nsidered as basi& s)ste"s !. re"neratin1 %ab!r6

Ti"e rate s)ste"
;ie&e rate s)ste"
0a%se) ;re"i" p%an
/oth time rate and piece rate system

5#i&# !. t#e .!%%!-in1 is sa%es .!r&e pa)r!%% in&enti'e6
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*ommission
S#i.t a%%!-an&e
O'er ti"e pa)"ent
3!ns

/a&t!r) O'er #ead &!st in&%des

/a&t!r) +ent
;r!pert) Ta<
Sa%aries !. /a&t!r) C%er,
All of the given

5#i&# !. t#e .!%%!-in1 &ann!t be sed as a base .!r t#e deter"inati!n !.
!'er#ead abs!rpti!n rate6

N"ber !. nits pr!d&ed
;ri"e &!st
C!n'ersi!n &!st
9iscount Allowed

C!st !. 1!!ds s!%d +s* 402 0002 !penin1 In'ent!r) +s* F2 0002 C%!sin1 in'ent!r)
+s* 92700*5#at -as t#e in'ent!r) trn!'er rati!6

8.2: times
4*?9 ti"es
4*7A ti"es
A*4? ti"es

In'ent!r) trn!'er rati! > C!st !. 1!!ds s!%dDA'era1e in'ent!r)

/O0 app%ied rate !. +s* A*?0 per "a&#ine #!r* Drin1 t#e )ear t#e /O0 t!
+s*29A2000 and 472000 "a&#ine #!rs -ere sed* 5#i&# !ne !. .!%%!-in1
state"ent is &!rre&t6

O'er#ead -as nder(app%ied b) +s*?2200
Overhead was over-applied &y !s.6$6##
O'er#ead -as nder(app%ied b) +s*92200
O'er#ead -as !'er(app%ied b) +s*92200

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C!st a&&!ntin1 &!n&epts in&%de a%% !. t#e .!%%!-in1 ENCE;T$

;%annin1
C!ntr!%%in1
0haring
C!stin1
__

__ are .tre &!sts t#at e..e&t t#e &rrent "ana1e"ent de&isi!n*

Sn, C!st
Standard C!st
!elevant *ost
Irre%e'ant C!st

+e%e'ant C!st$
+e%e'ant &!st is -#i&# &#an1es -it# a &#an1e in de&isi!n* T#ese are .tre &!sts
t#at e..e&t t#e &rrent "ana1e"ent de&isi!n*
5#i&# !. t#e .!%%!-in1 &!sts is part !. t#e pri"e &!st .!r "an.a&trin1 &!"pan)6
*ost of transporting raw materials from the suppliers premises
5a1es !. .a&t!r) -!r,ers en1a1ed in "a&#ine "aintenan&e
Depre&iati!n !. tr&, sed .!r de%i'eries t! &st!"ers
C!st !. indire&t pr!d&ti!n "ateria%s
Dire&t "ateria% !penin1 in'ent!r) add net pr&#ases is &a%%ed
Materia% &!ns"ed
;aterial availa&le for use
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T!ta% "ateria% pr&#ased
Materia% endin1 in'ent!r)

5#i&# !. t#e .!%%!-in1 is t! be &a%%ed pr!d&t &!st
Materia% &!st
Lab!r &!st
/O0 &!st

5#i&# !. t#e .!%%!-in1 &ann!t be sed as a base .!r t#e deter"inati!n !.
!'er#ead abs!rpti!n rate6
N"ber !. nits pr!d&ed
;ri"e &!st
C!n'ersi!n &!st
9iscount Allowed

;redeter"ined B/O0 &!stC rate
/a&t!r) !'er#ead rate is deter"ined !n t#e basis !. n!r"a% a&ti'it) %e'e%* N!r"a%
a&ti'it) %e'e% "eans t#e &apa&it) %e'e% at -#i&# t#e bsiness &an !perate in
n!r"a% &ir&"stan&es* Capa&it)
%e'e% &an be in ter"s !.$
Dire&t Lab!r C!st
Dire&t Materia% C!st
Dire&t Lab!r 0!rs
Ma&#ine 0!rs
;ri"e C!st

Se%e&ti!n !. &apa&it) %e'e% depends p!n t#e natre !. t#e bsiness2 i. its
in&%inati!n is t!-ards "a&#ine #!rs t#en "a&#ine #!rs -i%% be ta,en as a base
as &apa&it) %e'e%* It is a%s! ,n!-n as !'er#ead abs!rpti!n rate BOA+C*

A 3%an,et +ate is$
A single rate which used throughout the organi<ation departments
A d!b%e rates -#i&# sed t#r!1#!t t#e !r1ani=ati!n depart"ents
A sin1%e rates -#i&# sed in di..erent depart"ents !. t#e !r1ani=ati!n

3%an,et rates$
A b%an,et abs!rpti!n rate is a sin1%e rate !. abs!rpti!n sed t#r!1#!t an
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!r1ani=ati!ns pr!d&ti!n .a&i%it) and based p!n its t!ta% pr!d&ti!n &!sts and
a&ti'it)*
A standard rate is paid t! t#e e"p%!)ee -#en #e &!"p%eted #is H!b$
In ti"e %ess t#an t#e standard
,n standard time
In ti"e "!re t#an standard
3!t# in standard ti"e and "!re t#an t#e standard ti"e

5#i%e ded&tin1 In&!"e Ta< .r!" t#e 1r!ss pa) !. t#e e"p%!)ee2 t#e e"p%!)er
a&ts as a BanC IIIIIIIIIIIIIIIII.!r In&!"e Ta< Depart"ent*
A1ent !. #is !-n C!"pan)
Paid ta4 collection agent
Unpaid ta< &!%%e&ti!n a1ent

Gr!ss pa) %ess ded&ti!ns represents a%% e<&ept$
Net pa)
Ta,e #!"e pa)
T!ta% pa)
Other income

5#i&# !. t#e .!%%!-in1 best des&ribes t#e "an.a&trin1 &!sts6
9irect materials$ direct la&or and factory overhead
Dire&t "ateria%s and dire&t %ab!r
Dire&t "ateria%s2 dire&t %ab!r2 .a&t!r) !'er#ead2 and ad"inistrati'e !'er#ead
Dire&t %ab!r and .a&t!r) !'er#ead

0i1# %ab!r trn!'er is NOT desirab%e be&ase$
It den!tes t#e instabi%it) !. t#e %ab!r .!r&e
It is an indi&ati!n !. #i1# %ab!r &!st
It s#!-s .re:ent &#an1es in t#e %ab!r .!r&e

Man.a&trin1 entities &%assi.ied t#e in'ent!r) in -#i&# !. t#ree ,inds6
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Materia% in'ent!r)25I; in'ent!r)2/inis#ed 1!!ds in'ent!r)
Materia% in'ent!r)2pr&#ased 1!!d in'ent!r)25I; in'ent!r)
;aterial inventory$purchased good inventory$+inished goods inventory
5I; in'ent!r)2/inis#ed 1!!ds in'ent!r)2pr&#ased 1!!d in'ent!r)

5#i&# !. t#e .!%%!-in1 is &!rre&t .!r "a<i"" %e'e%6
!eorder level ) =;inimum consumption 4 Lead time> ( EO?
BMa<i"" &!ns"pti!n < Lead ti"eC K BMini"" &!ns"pti!n < Lead ti"eC E
EOQ
OBMa<i"" &!ns"pti!n ( Mini"" &!ns"pti!nC Lead ti"ePE EOQ
A%% !. t#e 1i'en !pti!ns

In'ent!r) trn!'er rati! &an be &a%&%ated as .!%%!-6
*ost of goods sold-Average inventory
Gr!ss pr!.itDA'era1e in'ent!r)
C!st !. 1!!ds s!%dDsa%e
C!st !. 1!!ds s!%dDGr!ss pr!.it

5#i&# !. t#e .!%%!-in1 is an e<a"p%e !. Statt!r) ded&ti!ns$
9eduction as ,ncome 5a4
Ded&ti!n as s!&ia% se&rit)
Sbs&ripti!ns t! a trade ni!n
N!ne !. t#e 1i'en

5#i&# !. t#e .!%%!-in1 is indire&t &!st6
T#e depre&iati!n !. "a&#iner)
T#e !'erti"e pre"i" in&rred at t#e spe&i.i& re:est !. a &st!"er
T#e #ire !. t!!%s .!r a spe&i.i& H!b

T#e &!"p!nent !. /a&t!r) !'er#ead are as .!%%!-
Dire&t "ateria% E Indire&t "ateria% E Dire&t e<pen&es
,ndirect material ( ,ndirect la&or ( Others indirect cost
Dire&t "ateria% E Indire&t e<pen&es E Indire&t %ab!r
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Dire&t %ab!r E Indire&t %ab!r E Indire&t e<pen&es

5#i&# !. t#e .!%%!-in1 best des&ribes t#e "an.a&trin1 &!sts6

9irect materials$ direct la&or and factory overhead
Dire&t "ateria%s and dire&t %ab!r
Dire&t "ateria%s2 dire&t %ab!r2 .a&t!r) !'er#ead2 and ad"inistrati'e !'er#ead
Dire&t %ab!r and .a&t!r) !'er#ead

O'erti"e t#at is ne&essar) in !rder t! .%.i%% &st!"er !rders is &a%%ed$
A'!idab%e !'erti"e
%navoida&le overtime
;re"i" O'erti"e
/%e< ti"e

O'erti"e t#at is ne&essar) in !rder t! .%.i%% &st!"er !rders is na'!idab%e
!'erti"e*

5#ere t#e app%ied /O0 &!st is 1reater t#an t#e a&ta% /O0 &!st it is$
Un.a'!rab%e 'arian&e
+avora&le variance
N!r"a% 'arian&e
3d1eted 'arian&e

T#e ;r!&ess !. &!st app!rti!n"ent is &arried !t s! t#at$
C!st "a) be &!ntr!%%ed
C!st nit 1at#er !'er#eads as t#e) pass t#r!1# &!st &enters
5#!%e ite"s !. &!st &an be &#ar1ed t! &!st &enters
*ommon costs are shared among cost centers

A &!"pan) #as &a%&%ated t#at '!%"e 'arian&e .!r a 1i'en "!nt# -as
n.a'!rab%e* T#is &!%d #a'e been &ased b) -#i&# !. t#e .!%%!-in1 .a&t!rs6
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Ta)%!rQs Di..erentia% ;ie&e +ate ;%an ses(((((((((((pie&e rates*
T#ree
5wo
/!r
/i'e

T#e &!"p!nents !. t#e pri"e &!st are$
9irect ;aterial ( 9irect La&or ( Other 9irect *ost
Dire&t Lab!r E Ot#er Dire&t C!st E /O0
Dire&t Lab!r E /O0

A &!st nit is
T#e &!st per #!r !. !peratin1 a "a&#ine
T#e &!st per nit !. e%e&tri&it) &!ns"ed
A nit !. pr!d&t !r ser'i&es in re%ati!n t! -#i&# &!sts are as&ertained
A measure of wor output in a standard hour

In&rease in "ateria% In'ent!r) "eans$
5he ending inventory is greater than opening inventory
T#e endin1 in'ent!r) is %ess t#an !penin1 in'ent!r)
3!t# endin1 and !penin1 in'ent!ries are e:a%
5!r,in1 #!rs !. %ab!r &an be &a%&%ated -it# t#e #e%p !. a%% e<&ept$
S"art &ard
Ti"e s#eet
C%!&, &ard
0tore card
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A"!nt !. net pr&#ase &an be &a%&%ated as .!%%!-
Purchase of direct material add trade discount less purchase return add
carriage inward less other material handling cost
;r&#ase !. dire&t "ateria% %ess trade dis&!nt % add pr&#ase retrn add
&arria1e in-ard %ess !t#er "ateria% #and%in1 &!st
;r&#ase !. dire&t "ateria% %ess trade dis&!nt %ess pr&#ase retrn %ess &arria1e
in-ard add !t#er "ateria% #and%in1 &!st
;r&#ase !. dire&t "ateria% %ess trade dis&!nt %ess pr&#ase retrn add &arria1e
in-ard add !t#er "ateria% #and%in1 &!st

5#i&# !. t#e .!%%!-in1 &!sts is part !. t#e pri"e &!st .!r "an.a&trin1
&!"pan)6
*ost of transporting raw materials from the suppliers premises
5a1es !. .a&t!r) -!r,ers en1a1ed in "a&#ine "aintenan&e
Depre&iati!n !. tr&, sed .!r de%i'eries t! &st!"ers
C!st !. indire&t pr!d&ti!n "ateria%s
A%% !. t#e .!%%!-in1 are ter"s sed t! den!te /a&t!r) O'er#eads ENCE;T$
+actory &urden
/a&t!r) e<penses
Man.a&trin1 !'er#ead
C!n'ersi!n &!sts

+ed&ti!n !. %ab!r trn!'er2 a&&idents2 sp!i%a1e2 -aste and absenteeis" are t#e
res%ts !. -#i&# !. t#e .!%%!-in1 -a1e p%an6
;ie&e rate p%an
Ti"e rate p%an
Di..erentia% p%an
@roup &onus system

C!sts -#i&# are &!nstant .!r a re%e'ant ran1e !. a&ti'it) and rise t! ne- &!nstant
%e'e% !n&e t#at ran1e e<&eeded is &a%%ed$
A .i<ed &!st
A 'ariab%e &!st
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A "i<ed &!st
A step cost
C!st !. 1!!ds s!%d &an be &a%&%ated as .!%%!-
*ost of goods manufactured Add Opening finished goods inventory Less
*losing finished goods inventory
C!st !. 1!!ds "an.a&tred Less Openin1 .inis#ed 1!!ds in'ent!r) Less
C%!sin1 .inis#ed 1!!ds in'ent!r)
C!st !. 1!!ds "an.a&tred Less Openin1 .inis#ed 1!!ds in'ent!r) Add C%!sin1
.inis#ed 1!!ds in'ent!r)
C!st !. 1!!ds "an.a&tred Add Openin1 .inis#ed 1!!ds in'ent!r) Add C%!sin1
.inis#ed 1!!ds in'ent!r)
5#i&# !. t#e .!%%!-in1 state"ent "easres t#e .inan&ia% p!siti!n !. t#e entit) !n
parti&%ar ti"e6
In&!"e State"ent
/alance 0heet
Cas# /%!- State"ent
State"ent !. +etained Earnin1

5#i&# !. t#e .!%%!-in1 state"ent is &!rre&t re1ardin1 reas!ns !. 'arian&e6
Di..eren&e bet-een &apa&it) %e'e% !'er -#i&# !'er#ead abs!rpti!n rate is
&a%&%ated & &apa&it) %e'e% attained*
Di..eren&e bet-een /O0 &!st bd1eted !r esti"ated !'er -#i&# !'er#ead
abs!rpti!n rate and /O0 a&ta%%) in&rred*
Di..eren&e bet-een t#e a&ta% %e'e% -#i&# &!"pan) a&#ie'ed and bd1et %e'e%
-#i&# &!"pan) deter"ined*
All of the given

5#i&# !. t#e .!%%!-in1 best des&ribes pie&e rate s)ste"6
T#e in&reased '!%"e !. pr!d&ti!n res%ts in de&reased &!st !. pr!d&ti!n
5he increased volume of production in minimum time
Estab%is#"ent !. .air standard rates
0i1#er !tpt is a res%t !. e..i&ient "ana1e"ent
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I.2 COGS > +s* 902000 G; Mar1in > 40@ !. sa%es 5#at -i%% be t#e 'a%e !.
Sa%es6
+s* 2002000
+s* ??2??9
!s. "##$###
+s* ?22A00
Sa%es >40000 M800@ D 40@ > +s* 8002000

C!st !. .inis#ed 1!!ds in'ent!r) is &a%&%ated b)$
;ultiplying units of finished goods inventory with the cost per unit
Di'idin1 nits !. .inis#ed 1!!ds in'ent!r) -it# t#e &!st per nit
Di'idin1 per nit &!st -it# .inis#ed 1!!ds in'ent!r)
Ded&tin1 t!ta% &!st .r!" .inis#ed 1!!ds in'ent!r)

C%!sin1 /inis# G!!ds in'ent!r) > C%!sin1 .inis#ed 1!!ds nits < &!st per nit
;eri!d &!sts are
E<pensed -#en t#e pr!d&t is s!%d
In&%ded in t#e &!st !. 1!!ds s!%d
!elated to specific Period
N!t e<pensed
Anna% re:ire"ent is 9700 nitsJ &!ns"pti!n per -ee, is 8A0 nits* Unit pri&e
+s A2 !rder &!st +s 80 per !rder* Carr)in1 &!st +s 8 per nit and %ead ti"e is 4
-ee,2 T#e E&!n!"i& !rder :antit) -!%d be* Se%e&t &!rre&t !pti!n$
892 units
400 nits
2A0 nits
8A0 nits

EOQ > R 2<+U<OCDUC < CC@

5#at -i%% be t#e i"pa&t !. n!r"a% %!ss !n t#e !'era%% per nit &!st* Se%e&t &!rre&t
!pti!n$
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Per unit cost will increase
;er nit &!st -i%% de&rease
;er nit &!st re"ain n&#an1ed
N!r"a% %!ss #as n! re%ati!n t! nit &!st

5#i&# !. t#e .!%%!-in1 is tre -#en pie&e rate s)ste" is sed .!r -a1e deter"inati!n6
-!r,er is paid !n t#e basis !. ti"e ta,en b) #i" t! per.!r" t#e -!r,
worer is paid on the &asis of production
;ie&e rate s)ste" is "!re bene.i&ia% t#an a 1aranteed "ini"" -a1e s)ste"

A%p#a &!"pan) pr&#ased a "a&#ine -!rt# +s 2002000 in t#e %ast )ear*N!- t#at "a&#ine &an be
se in a ne- pr!He&t -#i&# &!"pan) #as re&ei'ed t#is )ear* N!- t#e &!st !. t#at "a&#ine is t! be
&a%%ed$
;r!He&t &!st
Sn, &!st
Opp!rtnit) &!st
!elevant cost

/O0 abs!rpti!n rate is &a%&%ated b) t#e -a) !.

Esti"ated /O0 C!stDDire&t %ab!r #!rs
Esti"ated /O0 C!stDN! !. nits pr!d&ed
Esti"ated /O0 C!stD;ri"e C!st

5#i&# !. t#e .!%%!-in1 isDare n!t ass!&iated -it# !rderin1 &!sts6
Interest
Insran&e
Opp!rtnit) &!sts

A &!"pan) #as &a%&%ated t#at '!%"e 'arian&e .!r a 1i'en "!nt# -as n.a'!rab%e* T#is &!%d
#a'e been &ased b) -#i&# !. t#e .!%%!-in1 .a&t!rs6

Merri&, Di..erentia% ;ie&e +ate S)ste"$
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worer is not penali<ed even if his performance does not e4ceed 3# per cent of the .igh
5as.
-!r,er is n!t pena%i=ed e'en i. #is per.!r"an&e d!es n!t e<&eed 90 per &ent !. t#e 0i1# Tas,*
-!r,er is n!t pena%i=ed e'en i. #is per.!r"an&e d!es n!t e<&eed A0 per &ent !. t#e 0i1# Tas,*
-!r,er is n!t pena%i=ed e'en i. #is per.!r"an&e d!es n!t e<&eed 40 per &ent !. t#e 0i1# Tas,

An !r1anistati!n s!%d nits 4000 and #a'e &%!sin1 .inis#ed 1!!ds 4A00 nits and !penin1 .inis#ed
1!!ds nits -ere 8000*T#e :antit) !. nit pr!d&ed -!%d be$
9A00 nits
62## units
4A00 nits
7A00 nits

The Hino Corporation has a breae!en point "hen sa#es are Rs. $%&'&&& an( !ariab#e
)osts at
that #e!e# o* sa#es are Rs. $&&'&&&. Ho" +,)h "o,#( )ontrib,tion +ar-in in)rease or
(e)rease' i*
!ariab#e e.penses (roppe( b/ Rs. 0&'&&&1
23.45.
%&5.
12.5%.
0%5
Sa#es6$%&'&&&
VC6$&&'&&&
CM6%&'&&&
Contrib,tion to sa#es ratio 7C8S ratio9 6Contrib,tion Mar-in in Rs8Sa#es in Rs
%&'&&&8$%&'&&&6&.234
&.234:$&&6235
;e" VC6<&'&&&'
Sa#es6$%&'&&&
CM6<&'&&&
Contrib,tion to sa#es ratio 7C8S ratio9 6Contrib,tion Mar-in in Rs8Sa#es in Rs
<&'&&&8$%&'&&&6&.464&5
Rise in CM6723.4=4&96$0.4

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