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Q&A-2.1

Paper 2 Cost and Management Accounting

Syllabus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q&A-2.2

Bird's-Eye View . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q&A-2.5

Line Chart Showing Relative Importance Chapters . . . . . . . . . . . . . . Q&A-2.7

Table Showing Importance of Chapter on the Basis of Marks . . . . . . Q&A-2.8

Table Showing Importance of Chapter on the Basis of Marks

of Compulsory Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q&A-2.9

Legends for the Graphs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q&A-2.10

Study Material Based Contents

1 Lesson 1 Introduction to Cost and Management Accounting ........ Q&A-2.11

2 Lesson 2 Material Cost ................................................................... Q&A-2.33

3 Lesson 3 Labour Cost .................................................................... Q&A-2.62

4 Lesson 4 Direct Expenses and Overheads .................................... Q&A-2.79

5 Lesson 5 Activity Based Costing (ABC) ......................................... Q&A-2.97

6 Lesson 6 Cost Records - I (Integrated & Non-Integrated Accounts) Q&A-2.111

7 Lesson 6 Cost Records - II (Reconciliation of Cost and Financial

Accounts) ........................................................................ Q&A-2.124

8 Lesson 7 Costing Systems - I (Unit and Output Costing, Job

Costing & Batch Costing) ............................................... Q&A-2.139

9 Lesson 7 Costing Systems - II (Contract and Process Costing) Q&A-2.142

10 Lesson 7 Costing Systems - III (Service Costing / Operating

Costing) .......................................................................... Q&A-2.173

11 Lesson 8 Marginal Costing ............................................................ Q&A-2.180

12 Lesson 9 Standard Costing and Variance Analysis ...................... Q&A-2.217

13 Lesson 10 Budget, Budgeting and Budgetary Control .................... Q&A-2.237

14 Lesson 11 Cost Accounting Records and Cost Audit ...................... Q&A-2.261

15 Lesson 12 Analysis & Interpretation of Financial Statements - I Q&A-2.275

16 Lesson 12 Analysis & Interpretation of Financial Statements - II

(Cash Flow Statement) .................................................. Q&A-2.334

17 Lesson 12 Analysis & Interpretation of Financial Statements - III

(Fund Flow Statement) .................................................. Q&A-2.396

18 Objective Questions ....................................................... Q&A-2.426

Basic Formula Q&A-2.443

Q&A-2.2

Syllabus

Paper 2 (100 marks)Cost and Management Accounting

Level of knowledge: Working knowledge.

Objective: To acquire knowledge and understanding of the concepts, techniques and

practices of cost and management accounting and to develop skills for

decision making.

Detailed Contents

1. Introduction to Cost and Management Accounting

• Cost Accounting: Evolution, Meaning, Objectives and Scope

• Concepts of Costs, Classifications and Elements of Cost

• Cost Centre and Cost Unit

• Methods and Techniques of Costing

• Cost Accounting Standards

• Installation of a Costing System

• Practical Difficulties in Installing a Costing System

• Role of Cost Accountant in Decision Making

• Management Accounting: Evolution, Meaning, Objectives and Scope

• Tools and Techniques of Management Accounting

• Relationship of Cost Accounting, Financial Accounting, Management Accoun-

ting and Financial Management

• Conflicts in Profit versus Value Maximisation Principle

• Role of Management Accountant in Decision Making

2. Material Cost

• Materials Control - Concept and Techniques

• Procurement Procedures and Documentation: Methods of Purchasing;

Procedure of Purchases, Stores and Issue of Material; Stock Verification

• Methods of Pricing of Material: FIFO, LIFO, Simple Average, Weighted

Average

• Accounting and Control of Material Losses, Wastage, Scrap, Spoilage and

Defectives

• Inventory Management: Techniques of fixing of minimum, maximum and

reorder levels, Economic Order Quantity, ABC Analysis; Stock Verification

and Perpetual Inventory

3. Labour Cost

• Meaning and Classification of Labour Costs

• Accounting and Control of Labour Costs

Q&A-2.3

• Time Keeping and Time Booking

• Attendance and Payroll Procedures, Time Recording, Overtime and Idle Time

• Labour turnover and Remedial Measures

• Efficiency Rating Procedures; Remuneration Systems and Incentive Schemes

4. Direct Expenses and Overheads

• Direct Expenses: Meaning, Nature, Collection, Classification and Treatment

of Direct and Indirect Expenses

• Overheads: Meaning, Nature, Collection and Classification Functional

Analysis: Factory, Administration, Selling, Distribution, Research and

Development

• Behavioural Analysis: Fixed, Variable, Semi variable and Step Cost

Allocation, Apportionment, Absorption and Control of Overheads

• Preparation of Cost Sheet

5. Activity Based Costing (ABC)

• Meaning, Importance, Characteristics

• Elements and Steps involved

• ABC vs. Traditional Costing

• Uses and Limitations

6. Cost Records

• Cost Ledgers - Integrated Accounts and Non-Integrated Accounts

• Reconciliation of Cost and Financial Accounts

7. Costing Systems

• Unit and Output Costing

• Job Costing: Job Cost Cards, Collecting Direct Costs, Allocation of Overheads

and its Applications

• Batch Costing: Features and Applications

• Contract Costing: Features, Distinction between Job and Contract Costing,

Progress Payments, Retention Money, Escalation Clause, Contract Accounts,

Accounting for Material, Accounting for Plant Used in a Contract, Contract

Profit and Accounting Entries

• Process Costing: Features, Applications and Types of Process Costing,

Process Loss, Abnormal Gains and Losses, Equivalent Units, Inter-Process

Profit, Joint Products, By-Products and Accounting

• Service Costing: Features and Applications, Unit Costing and Multiple

Costing, Application, Identification of Cost Unit and Cost Determination and

Control

8. Marginal Costing

• Meaning, Advantages, Limitations and Applications

• Breakeven Analysis

• Cost-Volume Profit Analysis

• P/V Ratio and its Significance

Q&A-2.4

• Margin of Safety

• Absorption Costing: System of Profit Reporting and Stock Valuation

• Difference between Marginal Costing and Absorption Costing

• Income Measurement under Marginal Costing and Absorption Costing

9. Standard Costing

• Definition, Significance and Applications

• Various Types of Standards

• Installation of Standard Costing System-for Material, Labour, and Overhead

• Variance Analysis for Materials, Labour and Overheads and Accounting

Treatment of Variances

• Benchmarking for Setting of Standards

• Variance Reporting to Management

10. Budget, Budgeting and Budgetary Control

• Budget Concept, Manual

• Fixed and Flexible Budgets

• Preparation and Monitoring of Various Types of Budgets

• Budgetary Control System: Advantages, Limitations and Installation

• Zero Base Budgeting

• Programme and Performance Budgeting

11. Cost Accounting Records and Cost Audit

• Nature and Scope of Cost Audit

• Cost Accounting Records and Cost Audit under Companies Act, 1956

• Purpose, Scope and Advantages of Cost Audit

• Implementing Authorities of Cost Audit

• Cost Audit Techniques and Programmes

• Cost Audit Report

• Cost Auditor - Appointment, Rights and Responsibilities

12. Analysis and Interpretation of Financial Statements

• Financial Statements: Nature, Attributes, Objectives, Importance, Limitations

• Recent Trends in presenting Financial Statements

• Financial Statements Analysis: Types, Methods, Objectives, Limitations

• Ratio Analysis: Accounting, Uses, Classification, Advantages, Limitations

• Cash Flow Statement

• Fund Flow Statement

• Difference between Cash Flow and Fund Flow Statement

• Management Reporting

Q&A-2.5

Bird's-Eye View

Paper 2

Cost and Management Accounting

Question Paper Based Contents of Last Five Examination

Years Q. No. Chapter Page

No.No. Name

2010

Dec.

5.

6.

7. (a)

(b)

(c)

8. (a)

(c)

18

16

1

2

11

4

13

Objective Questions

Analysis & Interpretation of Financial Statements - II

(Cash Flow Statement)

Introduction to Cost and Management Accounting

Material Cost

Marginal Costing

Direct Expenses and Overheads

Budget, Budgeting and Budgetary Control

432

340

19

40

188

83

247

2011

June

5.

6. (a)(i)

(ii)

(iii)

(b)

7. (a)(i)

(ii)

(iii)

(b)

(c)

8. (a)

(b)

(c)

18

1

2

3

16

13

11

9

15

1

3

4

2

Objective Questions


Material Cost

Labour Cost




Marginal Costing

Costing Systems - II (Contract and Process Costing)

Analysis & Interpretation of Financial Statements - I


Labour Cost

Direct Expenses and Overheads

Material Cost

434

17

37

66

345

240

184

144

284

19

68

86

41

2011

Dec.

5.

6. (a)

(b)

7. (a)

(b)

(c)

8. (a)

(b)

18

16

2

3

13

13

15

11

Objective Questions



Material Cost

Labour Cost


" "


Marginal Costing

436

347

42

69

248

241

286

189

Q&A-2.6

2012

June

5.

6. (a)

(b)

(c)

7. (a)

(b)

8. (a)

(b)

(c)

18

2

9

3

16

11

15

13

13

Objective Questions

Material Cost


Labour Cost



Marginal Costing



" "

438

42

146

67

349

190

288

242

242

2012

Dec.

5.

6. (a)

(b)

7. (a)

(b)

8. (a)

(b)

(c)

18

15

13

9

2

16

11

1

Objective Questions




Material Cost



Marginal Costing


440

290

244

147

44

350

192

20

Q&A-2.7

Line Chart Page

Q&A-2.10

Legends for the GraphsS

ho

rt N

ote

s

Dis

tin

gu

ish

Be

twe

en

De

sc

rip

tiv

e

Pra

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l

Q&A-2.11

1 Introduction to Cost and

Management Accounting

This Chapter Includes• Concept of Cost; • Evolution of Cost Accounting• Costing, Cost Accounting and Cost

Accountancy• Objectives, Importance and Scope of

cost accounting• Classifications and Elements of

Cost;• Cost Centre and Cost Unit • Methods and Techniques of Costing• Cost Accounting Standards • Installation of a Costing System • Practical Difficulties in Installing a

Costing System • Role of Cost Accountant in Decision

Making

• Management Accounting and itsevolution, Meaning, Objectives,Nature and Scope

• Tools and Techniques of Manage-ment Accounting

• Relationship of Cost Accounting,Financial Accounting, ManagementAccounting and Financial Manage-ment

• Limitations of Management Accoun-ting

• Conflicts in Profit versus ValueMaximisation Principle

• Role of Management Accountant inDecision Making.

Marks of Short Notes, Distinguish Between, Descriptive & Practical Questions

Q&A-2.12 O Solved Scanner CS Executive Program me M-I Paper 2

CS Executive Programme (Module I)

OBJECTIVE QUESTIONS

2008 - Dec [5] {C} (a) State, with reasons in brief, whether the following statements are

true of false :

(i) Cost accounting is a branch of financial accounting. (2 marks)

(b) Choose the most appropriate answer from the given options in respect of the

following :

(iii) The type of process loss that should not affect the cost of inventories is —

(a) Abnormal loss

(b) Normal loss

(c) Seasonal loss

(d) Standard loss. (1 mark)

(c) Re ! write the following sentences after filling !up the blank spaces with

appropriate word (s)/ figure (s) :

(i) Cost is a fact whereas price is a __________ .

(ii) Imputed costs are relevant for __________ .

(iii) A _______ is the cost that has already been incurred and cannot be avoided

by decisions taken in the future.

(v) A profit centre is a division or organisational unit concerned with controlling

both ______ and costs. (1 mark each)

Answer :

(a) (i) False;

(b) (iii) (a) Abnormal loss

(c) (i) policy;

(ii) decision making;

(iii) sunk cost;

(v) sales / (revenue);

2009 - June [5] {C} (a) State, with reasons in brief, whether the following statements

are true or false :

(ii) Fixed cost per unit remains fixed.

(iv) Rent on owned building is included in cost accounts. (2 marks each)

(b) Re-write the following sentences after filling-in the blank spaces with appropriate

word(s)/figures(s) :

(ii) Abnormal wastage_________ part of cost of production.

[Chapter # 1] Introduction to Cost and Management... O Q&A-2.13

(iv) Direct material + direct labour + factory overheads = _____. (1 mark each)

Answer :

(a) (ii) False : It is the total fixed cost which remains fixed inspective of the level of

output. But, the fixed cost per unit will be different at different level of output.

As level of output increases the fixed cost per unit will decrease and the level

of output decreases the fixed cost per unit will increases.

(iv) True: Rent on owned building is included in cost accounts, it is done to

calculate the real cost after taking into account the national rent which would

have been paid, has the building been taken on rent.

(b) (ii) is not

(iv) Factory cost/Works cost.

2009 - Dec [5] {C} (a) State, with reasons in brief, whether the following statements are

correct or incorrect :

(i) All long-term costs are controllable.

(ii) Rent on own building is not included in cost accounts. (2 marks each)


following :

(iii) Non-controllable cost is the cost which –

(a) Is not subject to control at any level of managerial supervision

(b) Cannot be controllable during a particular financial year

(c) Cannot be controllable at any cost

(d) None of the above. (1 mark)

(c) Re-write the following sentences after filling-in the blank spaces with appropriate

word(s)/figure(s) :

(v) ______is the allotment of proportion of items of cost to cost centre/cost units.

(1 mark)

Answer:

(a) (i) Correct : Normally, in short run all variable cost are controllable and all fixed

cost are not controllable whereas in long run/terms all cost whether variable or

fixed cost are controllable.

(ii) Correct : For decision making, point of view rent on own building is very

important. Whether it is not recorded in the book and also important in

comparing alternatives. This cost is treated as imputed or national costs and

do not enter into traditional accounting systems.

(b) (iii) (a)

(c) (v) Apportionment

2010 - June [5] {C} (a) State, with reasons in brief, whether the following statements

are correct or incorrect:

(iv) A profit centre whose performance is measured by its return on investment (ROI)

Q&A-2.14 O Solved Scanner CS Executive Program me M-I Paper 2

is known as investment centre. (2 marks)


following:

(iv) Fixed costs remain fixed—

(a) Over a short period

(b) Over a long period and within relevant range

(c) Over a short period and within a relevant range

(d) Over a long period. (1 mark)


word(s)/figure(s):

(i) expenses are excluded from cost. (1 mark)

Answer :

(a) (iv) This statement is Correct :

Reason :- In investment centre, it is the responsibility of the manager to earn

a satisfactory return on the assets employed in his responsibilities centre which

is govern by ROI.

(b) (iv) (c)

(c) (i) Notional

2010 - Dec [5] {C} (a) State, with reasons in brief, whether the follower statements are

true or false :

(iv) Opportunity cost is recorded in the books of account. (2 marks)


following :

(v) The management accounting is an extension of !

(a) Financial accounting

(b) Responsibility accounting

(c) Cost accounting

(d) All of the above. (1 mark)


word(s)/figure(s) :

(iv) ________costs are not useful for decision making as all past costs are

irrelevant. (1 mark)

Answer :

(a) (iv) False: Opportunity cost is not recorded in the books of account, even though

it is considered for decision making. Opportunity cost is the benefit foregone

which would have been received had it been used for second best use.

(b) (v) (d) All of the above.

Solved Scanner CS ProfessionalProgramme Drafting Appearances and

Pleadings Paper 2 Dec 2013

Publisher : Shuchita Prakashan ISBN : 9789350346006 Author : Dr. Arun Kumar, CS(Dr.) Himanshu Srivastava

Type the URL : http://www.kopykitab.com/product/1642

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