Management Information - 100 Marks

Q-1) What are three stages in determining the share of overhead to be attributed to a
cost unit?
Q-2) What is overhead allocation?
Q-3) What is overhead apportionment?
Q-4) What is blanket or single absorption rate?
Q-5) What is departmental absorption rate?
Q-6) What is over absorption?
Q-7) What is under absorption?
Q-8) ABC Ltd. has been using an overhead absorption rate of Tk. 4.50 per labor hour.
During the year overhead expenditure amounted to Tk. 215,000 and actual 44,000
labor hours were used.
What is the over absorbed/under absorbed amount? [MJ10]
Q-9) What are costing methods?
Q-10) Discuss the costing methods with their relevant advantages and disadvantages.
[MJ10]
Q-11) What is job costing?
Q-12) What is life cycle costing?
Q-13) What are component elements of a product’s cost over its life cycle?
Q-14) What is target costing?
Q-15) Which methods of costing should be appropriate for the following industries:
(a) Chemical Industry
(b) Garments Industry
(c) Fitting Kitchen Industry
(d) Construction company
(e) Paper Industry
[MJ10]
Q-16) What is just in time (JIT)?
Q-17) What are the operational requirements for JIT?
Q-18) What are the benefits of JIT?
Management Information 2
Chapter # 3: Calculating unit cost part 2
Q-1) What are the stages in What is the over
determining the share of overhead absorbed/under absorbed
to be attributed to a cost unit? amount? [MJ10]
There are three stages in determining the
share of overhead to be attributed to a cost Q-9) What are costing methods?
unit.
(i) Overhead allocation,
Q-10) Discuss the costing methods
(ii) Overhead apportionment,
with their relevant advantages
(iii) Overhead absorption.
and disadvantages. [MJ10]

Q-2) What is overhead allocation? To compute cost of production, different

methods are being used. It depends on the
The first step in absorption costing is nature of its operation. Methods are:
allocation. Allocation is process by which whole
cost items are charged direct to the cost (a) Specific order costing:
centre. A cost center act as a collecting place (i) Job costing,
for cost before they analyzed further. (ii) Contract costing,
(iii) Batch costing,
(b) Process costing
Q-3) What is overhead apportionment?

This involves apportioning general overhead to Q-11) What is job costing?

cost centre (the first stage) and then
reapportioning services cost centre to the Job costing is appropriate where each
production department (second stage). separately identifiable cost unit or job is of
relatively short duration.

Q-4) What is blanket or single

absorption rate? Q-12) What is life cycle costing?

A blanket or single factory overhead
absorption rate is an absorption rate used
throughout the factory and for all jobs and
units of output irrespective of the department
in which they were produced.
A product incurs costs over the whole of its life
cycle, from the design stage through the
development to market launch, production and
sales and its eventual withdrawal from the
market.

Q-5) What is departmental absorption Q-13) What are component elements of a

rate? product’s cost over its life cycle?

Component elements of a product’s over its

Q-6) What is over absorption? life cycle include the following:
(a) Research and development cost,
Over absorption means that the overheads (b) Training cost
charged to the cost of production are greater (c) Promotion cost,
that the overhead actually incurred. (d) Distribution cost,
(e) Marketing cost,
(f) Retirement and disposal cost.
Q-7) What is under absorption?

Under absorption means that insufficient Q-14) What is target costing?

overheads have been included in the cost of
production.

Q-15) Which methods of costing

Q-8) ABC Ltd. has been using an should be appropriate for the
overhead absorption rate of Tk. following industries:
4.50 per labor hour. During the (a) Chemical Industry
year overhead expenditure (b) Garments Industry
amounted to Tk. 215,000 and (c) Fitting Kitchen Industry
actual 44,000 labor hours were (d) Construction company
used. (e) Paper Industry
[MJ10]
Management Information 3
Chapter # 3: Calculating unit cost part 2
Appropriate method for the industry:

Chemical Industry Batch

Garments industry Batch
Fitting kitchen industry Job
Construction company Contract
Electricity company Process
Paper industry Process

Q-16) What is just in time (JIT)?

Just in time (JIT) is an approach to operations

planning and control based on the idea that
goods and services should be produced only
when they are needed.
They should not be produced too early, so that
inventories build up, nor too late, so that
customer has to wait.
JIT consists of JIT purchasing and JIT
production.

Q-17) What are the operational

requirements for JIT?

A number of operational requirements are vital

to the success of a JIT system:
(a) High quality,
(b) Speed,
(c) Reliability,
(d) Flexibility,
(e) Efficient production planning,
(f) Reliable sales forecasting.

Q-18) What are the benefits of JIT?

An efficient JIT system enables managers to

control and reduce cost in a number of areas,
including the following:
(a) warehousing costs,
(b) improved capacity utilization
(c) reduction in waste,
(d) Reduction in write-off due to
obsolescence.