COSTING

Materials :
1. What is LIFO method?
It is a method of pricing of material issues. Here materials
received recently are issued first to the production. Suitable when
prices are increasing.
2. What is store ledger?
Stores ledger is a perpetual inventory record. This particular
record reflects the movement of raw material & current position.
3. What are perpetual inventory records?
These are the records maintained by the stores department. They
help in controlling the stock of material in stores on a continuous
basis. Include bin card, stores ledger etc.
4. State two differences between Bin card & Store ledger account
Bin card Stores ledger a/c
Quantitative record Contains both quantity & value
Kept along with the Bin Kept separately in stores
5. What is EOQ?
It is the quantity by ordering which carrying cost & ordering costs
are minimum.
EOQ = 2AO
C
6. What is re-order level?
This is the level of stock on attaining which the store keeper
should place order to the vendor for the fresh supply of materials.
ROL = Maximum consumption x Maximum ROP
7. What is Material Turnover Ratio? (Inventory or Stock Turnover
Ratio)
It is the ratio of materials consumed to the average stock held for
a given period.
M.T.R. = Material consumed
Average stock held
8. What is Material Requisition?
For the purpose of issuing materials to production, authorization
should come from the right person at the level, Such written
authorization is called material requisition.
9. What is minimum stock level?
It is the safety stock which guarantees orderly production
schedule. It depends on average rate of consumption, lead time,
R.O.L.
10. What is a Bin Card?

1
 It is a quantitative record kept attached to Bin. Records the
movement of materials .( receipts & issues ) Stores personnel
makes the entries.
11. What is material requisition note?
It is the note issued by the production department to the stores
department requesting the issue of materials. This serves as an
authorization for the issue of materials.
12. What is danger level?
This is the level fixed below the minimum stock level. Reflects
emergency stock position .At this level, stock should be
immediately obtained to avoid stoppage of production
Danger level = Minimum consumption x Emergency Delivery time
13. What is Material Indent ? ( Purchase requisition )
This is a form used as a formal request to purchasing department
to purchase materials. This form is prepared by stores keeper for
regular materials. This is approved by an executive.

Labour :
1. State 2 differences between Halsey & Rowan Plan ?
Halsey Plan Rowan Plan
Bonus- 50% of time saved Bonus- Time saved in relation to standard
time
Bonus increases with Bonus increases rapidly upto 50% savings
increase in efficiency in standard time & later declines
2. Name two causes for labour turnover.
Important causes of Labour turn over are:
a. Poor working conditions
b. Injustice in transfers & Promotions
c. Better opportunity
3. What is time booking?
Recording of time actually taken by the workers to perform the
tasks or jobs assigned to them. Helps to reduce idle time & to
provide basis for overhead absorption.
4. What is Overtime?
Extra time worked by a worker over & above the normal working
hours. For the over time worked workers will get their wages at
premium rate.
5. What is Labour Turnover Ratio?
It is the ratio of employees replaced to the average number of
employees for a given period.
L.T.R. = Employees replaced
Average no. of Employees
6. What is Idle Time?
2
 It is time for which the worker is paid for not working. It may be
normal idle time or abnormal idle time. This increases the
overhead costs.
7. What is labour hour rate?
It is the overhead cost incurred for engaging a labour per hour.
L.H.R. = Overheads
Estimated labour hours
8. Write the formula for calculating earnings under Rowan Plan.
9. What is piece system of wage payment?
It is a system of wage payment in which a worker is paid on the
basis of number of units that he produces. A rate per unit is fixed
& he is paid at that rate.
Earnings = Number of units x standard piece rate
10. State any two merits of Halsey Plan.
It guarantees minimum wage based on time
It rewards in terms of money if efficiency is shown
11. State any two demerits of straight salary method.
It fails to provide motivation to the workers
It encourages idle time
12. What is time keeping?
Recording of arrival time departure time of a worker in a factory is
called time keeping. Helps in cultivating discipline & to control
absenteeism.
13. How does Taylor’s system differs from Merric’s system.
Taylor’s system Merric’s system
Divides workers into two Divides workers into three
categories categories
AOP & SOP compared to know Efficiency is expressed in %.
the efficiency level
14. What are the objectives of time keeping?

Overheads
1. What are variable overheads ?
These are the overheads which are sensitive to the level of
activity. Whenever there is fluctuation in the level of activity, Such
overheads, respond accordingly
2. What is absorption of overheads ?
It is the process of charging production department overhead to
the ultimate cost unit.
3. What are’ on cost’ ? How do they differ from Prime cost ?
On costs are nothing but, overhead expenses.

Differences :
3
On Cost Prime Cost
1. Indirect Expenses 1. Direct Expenses
2. May be fixed /Variable/Semi 2.It is always variable
variable
4. Give two examples of selling overheads ?
Salesman salary, Advertisement expenses, Bad debts.
5. Give examples of service departments.
Human resource department, Power department, Canteen
department, Time keeping department
6. What is the difference between allocations and apportionments.
Allocation : Distribution of overheads over various
departments on a predetermined basis
Apportionment: Means distribution of overheads on suitable
basis
7. What is repeated distribution method in overhead management ?
It is one method of reapportionment of service department
overhead cost to production departments. Here service department
costs are repeatedly distributed to other departments round by
round till the amounts become negligible.
8. Give two examples of semi-variable overheads.
Depreciation, repairs of plant and machinery, Postage,
Stationery, telephone, etc.
9. What is Machine hour rate ? Give formula.
It is the cost of running the machine for one hour. It may
include standing charges as well as machine expenses.
= Total Overheads
Estimated machine hours
10. What do you mean by over absorption of over heads
If overheads recovered is more than the actual overheads
incurred, then it is called “ Over absorption of over heads “.
11. Define Over heads.
The sum total of indirect material (Eg. Oil, cotton waste ),
indirect labour ( Eg.bonus ), indirect expenses (Eg. Canteen
expenses )
12. What do you mean by functional classification of overheads ?
If the classification of overheads is made on the basis of
functions performed like administration, production, selling and
distribution overheads etc. then, it is called functional distribution
of classification of overheads.
13. What is under recovery of overheads.
If over heads recovered is less than the actual over heads
incurred then it is called “ under recovery of over heads.