1.

ABC analysis is an inventory management technique that determines the value of inventory items
based on their importance to the business. ABC ranks items on demand, cost and risk data, and
inventory mangers group items into classes based on those criteria. it involves a system that controls
inventory and is used for materials and throughout the distribution management. It is also known
as selective inventory control or SICThe ABC analysis considers that all the goods cannot have equal value in
the market. They are found in three different categories:.

A items: essential goods with the highest values B items : goods with slightly higher values C items
: least valuable goods

The five advantages of an effective ABC analysis

 1) Fight fewer fires. You have to choose your battles. ...

 2) Invest working capital on products that deliver sales. ...
 3) Manage important items more closely. ...
 4) Let an automated system manage less important items automatically.
 5) Profit!

DIRECT COST INDIRECT COST

Meaning A cost that is easily Indirect Cost is defined as the cost

attributable to a cost object is that cannot be allocated to a particular
known as Direct Cost. cost object.

Benefits Specific projects Multiple projects

Aggregate When all the direct costs are Total of all the indirect costs is called
taken together they are as overheads or oncost.
known as prime costs.

Classification Direct material, direct labor, Indirect material, indirect labor,

direct expenses indirect overheads

EG: DEPRECIATION
ADMINISTRATIVE COST

3A cost center is a function within an organization that does not directly add to profit but still
costs money to operate, such as the accounting, HR, or IT departments. The main use of a cost center
is to track actual expenses for comparison to budget.

4.. Cost Accounting and Financial Accounting

Cost Accounting aims at maintaining cost records of an organisation. Financial Accounting aims at
maintaining all the financial data of an organisation.

Cost Accounting Records both historical and per-determined costs. Conversely, Financial Accounting
records only historical costs.

Users of Cost Accounting is limited to internal management of the entity, whereas users of Financial
Accounting are internal as well as external parties.

In cost, accounting stock is valued at cost while in financial accounting, the stock is valued at the lower of
the two i.e. cost or net realisable value.

Cost Accounting is mandatory only for the organisation which is engaged in manufacturing and production
activities. On the other hand, Financial Accounting is mandatory for all the organisations, as well as
compliance with the provisions of Companies Act and Income Tax Act is also a must.

Cost Accounting information is reported periodically at frequent intervals, but financial accounting
information is reported after the completion of the financial year i.e. generally one year.

Cost Accounting information determines profit related to a particular product, job or process. As opposed
to Financial Accounting, which determines the profit for the whole organisation made during a particular
period.

The purpose of Cost Accounting is to control costs, but the purpose of financial accounting is to keep
complete records of the financial information, on the basis of which reporting can be done at the end of
the accounting period.

OBJ ECTIVES COST ACC

1. To ascertain cost of production of every unit, job, operation, process, department or service, and to
develop cost standards.
2. To indicate to the management any inefficiencies and the extent of various forms of waste, whether of
material, time, expense or in the use of machinery, equipment and tools. Analysis of the causes of
unsatisfactory results may indicate remedial action.
3. To reveal sources of economics after taking into account design of products and methods of production,
type of equipment, rate of output and layout of activities.
4. To disclose profitable and unprofitable activities so that steps can be taken to eliminate or reduce those
from which little or no profit is obtained or to change the method of production or incidence of cost in
order to render such activities more profitable.
5. To provide actual figures of cost for comparison with estimates and to assist the management in their
price-fixing policy.
6. To present comparative cost data for different periods and different volumes of production and thereby
assist the management in budgetary control.
7. To record and report to the concerned manager how actual costs compare with standard costs and
possible causes of differences (variances) between them.
 8. To indicate the exact cause of increase or decrease in profit or loss shown by the financial accounts.
9. To provide data for comparison of costs within the firm and also between similar firms.
10. To show the effect on profitability when a factory is not producing to full capacity.

5. FSND stands for fast-moving, slow-moving and non-moving AND DEAD ITEMS. Essentially, this
segments inventory into three classifications. It looks at quantity, consumption rate and how often the item
is issued and used. Fast-moving items are items in your inventory stock that are issued or used
frequently.

6.Product costs are those directly related to the production of a product or service intended for
sale. eg Raw material, wages on labor, production overheads, rent on the factory, etc:Period costs are
all other indirect costs that are incurred in production. Overhead and sales and marketing expenses
are common examples of period costs

7.. Just-in-time, or JIT, is an inventory management method in which goods are received from
suppliers only as they are needed. The main objective of this method is to reduce inventory holding
costs and increase inventory turnover Benefits of JIT Inventory Management

 Reduce Wastage. The JIT inventory management model eliminates excess inventory and overstocking. ..
 Improve Efficiencies. ...
 Increase Productivity. ...
 Optimize Production. ...
 Reduce Costs. ...
 Improve Quality.
8. What is an idle time? Idle time is paid time that an employee, or machine, is unproductive due to
factors that can either be controlled or uncontrolled by management. Idle time can be classified
either as normal or abnormal. Minimizing idle time is key if a business wants to maximize efficiency over
long periods of time. the cost of such idle time is included as either direct labor or manufacturing
overhead and is part of the total product cost

9. VED analysis is an inventory management technique that classifies inventory based on its
functional importance. It categorizes stock under three heads based on its importance and necessity for
an organization for production or any of its other activities. VED analysis stands for Vital, Essential, and
Desirable.

10. Job order costing is the ascertaining of costs that are incurred in the undertaking of a specific job.
For example: Say a customer bought shoes personalized with their name written on the sides and
shoelaces made of cotton, rather a basic nylon material. Since this order is unique, a business would
use job order costing to create a unique price to charge the customer for their custom-made shoe.

contract costing is the ascertaining of costs associated with the production of a specific product as per
the contract agreement with the customer .ex: For example, a company bids for a large construction
project with a prospective customer, and the two parties agree in a contract for a certain type of
reimbursement to the company

11. An imputed cost is a cost that is incurred by virtue of using an asset instead of investing it or
the cost arising from undertaking an alternative course of action. An imputed cost is an invisible cost
that is not incurred directly, as opposed to an explicit cost, which is incurred directly.
12. A unit cost is a total expenditure incurred by a company to produce, store, and sell one unit of a
particular product or service. Unit costs are synonymous with cost of goods sold (COGS). This
accounting measure includes all of the fixed and variable costs associated with the production of a good
or service Example of a Cost Unit:The cost unit of the steel business would be a ton, and the
expense unit of the hotel business is a room.

13.Variable costs change based on the amount of output produced. Variable costs may include
labor, commissions, and raw materials. Fixed costs remain the same regardless of production
output. Fixed costs may include lease and rental payments, insurance, and interest payments.

Long question

1. Cost Accounting is a method of accounting wherein all the costs involved in performing any process,
project or product are noted and analyzed. Such analysis helps the management in taking strategic
decisions. Cost accounting uses various techniques to make an organization cost effective

MethodType of Business1 Job Costing – The costs incurred for a particular job can be easily identified-Advertising2
Contract costing – Similar to job costing but the duration of assignment is longer.  Construction 3 Unit costing – The
costs are incurred for a fixed quatiny .Mining 4 Batch costing – The costs incurred for a fixed number of units
forming a batch -Manufacturing of spare parts 5 Process costing – The processes involved are easily distinguished -
Textile units 6 Operating costing – The costs are incurred for services rendered.Hospitals

2 payroll department. the department that determines the amounts of wage or salary due to each
employee. The payroll department works as a team to get payroll checks distributed to employees in a
timely fashion.

Functions involve balancing and reconciling payroll data and depositing and reporting taxes. The
payroll department takes care of wage deductions, record keeping and verifying the reliability of pay
data. The payroll department delivers payroll checks, maintains compliance with tax laws, records
paperwork for new hires and edits existing employee files. Payroll professionals are also responsible
for calculating reimbursements, bonuses, overtime and holiday pay.

common Types of Payroll Fraud

 1. Ghost Employee Fraud :Ghost employees only exist on paper; ghost employee fraud occurs when ‘employees’
listed in the payroll register receive payment but aren’t actually working for said company.

2. Timesheet Fraud This type of payroll fraud is one of the most common payroll frauds. Timesheet fraud can be
defined as an employee falsely claiming hours on their timesheet and getting paid for these hours while not actually
at work. Timesheet fraud may occur in industries where employees are paid by the hour and can include:

Clocking in and out at incorrect times

False claims regarding the number of hours worked

Having someone else punch in and/or out for them

 3. Sick Leave Fraud :Sick leave fraud refers to an employee falsely claiming sick pay from their company while
working in another job.
4. Fraudulent Claims Over Number of Units Produced :Another common payroll fraud example is falsified
units produced. For example, in manufacturing or sales an employee may boost their numbers for higher pay and/or
for more commission.
5. False Expenses Fraud :A false expense claim occurs when an employee submits a claim for expenses to be
reimbursed without having the right to do so. For example, claiming personal expenses such as a meal with friends
or family as a business expense.
6. Pay Rate Falsification: Pay rate falsification or wage falsification may occur due to a collaboration between
employees and the payroll department whereby additional funds are allocated, paid out, and then divided between
the two parties.
7. Misclassifying Employees: Companies may misclassify employees in the payroll system to reduce staffing
costs and overall tax bills. For example, a company may classify full-time staff members as contractors.
8. Commission and Bonus Fraud: This type of payroll fraud occurs when additional funds like commission and
bonuses are received by employees unjustly.
How to Prevent Payroll Fraud

1. Set Up a System of Checks and Balances. ...

2. Switch to a Modern Timesheet System. ...
3. Do an Internal Audit of Payroll Taxes. ...
4. Install CCTV Systems. ...
5. Regulate Employee Behavior.
3. TIME KEEPING

Meaning of Time Keeping -

When the arrivals as well as the departure time of the labour is recorded, it is known as time keeping.
Where there are large numbers of employees in an organisation, separate personnel in the name of "time
keeper" is appointed who heads the time keeping department. The purpose of this department is to
provide timely information to the payroll department, which was assist the latter in computation of the
wage payments.

Time Keeping has the following purposes :

1) It helps in maintaining the rules and discipline and avoid extra payments to employees.

2) It provides overhead rates on the basis of labour hours.

3) It differentiates between the normal time and the overtime and thus the same is separately allocable.

4) Statutory requirements are duly complied with.

5) Where the labour is paid on time rate basis it provides with the actual time.6) It is helpful in calculation
of Bonus, Gratuity, Pension Payment etc

There are two main time-keeping methods:

1. Manual methods, which include attendance register or muster roll and the checks, token, or disc
method
 2. Mechanical methods, which are divided into the time clock method (either the dial recorder
system or the key recorder system)

1. Manual Methods of Time-Keeping

(a) Attendance Register or Muster Roll

(b) Checks, Token, and Disc Method

Under this method, every worker may be given a check, or a token or a disc, that bears their identification
number. To record attendance, a box or board may be kept at the gate. As workers enter the gate, they
can place their token in the appropriate place.

Mechanical Methods of Time-Keeping

1. Time Clock Method

This is a mechanical method and is quite useful in recording the attendance of workers entering an
establishment.Under this system, a time clock card is used to record attendance, which is allotted to
every worker with their identification number, as well as other relevant details. These cards are kept
outside the gate in a rack.Two racks — one for IN and another for OUT — are generally used to keep
these cards.eg; Biometric Clocks..

4.Economic Order Quantity, also known as Economic Purchase Quantity, is the order quantity that
minimizes the total holding costs and ordering costs in inventory management. It is one of the oldest
classical production scheduling models .Economic order quantity is a key metric for your organization's
sustainability because ordering too much can lead to high holding costs and take resources away from
other business activities, like marketing or R&D, that could further boost sales or reduce costs.

Stock level formulae

Maximum Stock Level Formula: l = Reordering Level + Reordering Quantity – (Minimum Consumption x
Minimum Reordering period)

Minimum stock Level Formula: = Re-ordering Level – (Normal/Average Consumption x

Normal/Average Reorder Period)

Reordering Level =Minimum level + (Normal/Average Consumption x Normal/Average Reorder Period)

Average level Formula: Average stock level = (Maximumlevel+Minimumlevel)/2

Danger level Formula: Danger level = (Average rate of consumption)×Urgent supply time