IGNOU| ELEMENTS OF COSTING (ECO - 10)| SOLVED PAPER – (DEC - 2022)| (BDP)| ENGLISH MEDIUM
BACHELOR'S DEGREE PROGRAMME
Term-End Examination
December - 2022
ELECTIVE COURSE: COMMERCE
ECO-10
ELEMENTS OF COSTING
Time: 2 hours
Maximum Marks: 50
Note: Attempt any two questions from Section A and
any two questions from Section B.
हिंदी माध्यम: यहां क्लिक करें
SECTION - A
1. Distinguish between cost accounting and financial
accounting. 10
Ans:- The differences between cost accounting and
financial accounting are:-
Cost
accounting is known as a form of managerial accounting which is used by
businesses to classify, summarize and analyze various costs for the purpose of
cost control and cost reduction and thus enable the management to take better
decisions. make capable. Help is available. The primary function of cost
accounting is said to be to arrange, record, and identify appropriate
investment allocations for investments to determine the cost of goods and
services. It also helps in presenting relevant data to the management related to
ascertaining service, contract or shipment costs.
Financial
accounting is a branch of accounting that deals with summarizing,
recording, and reporting the financial transactions occurring in a business
entity over a period of time. Financial accounting is used to prepare various
financial statements that can be used by companies to show their financial
performance to various users of financial information such as creditors,
investors, customers and suppliers, etc.
|
Cost Accounting |
Financial Accounting |
|
|
Definition |
Cost accounting is known as a form of
managerial accounting which is used by businesses to classify, summarize and
analyze various costs for the purpose of cost control and cost reduction and
thus enable the management to take better decisions. Is made capable. Is made
capable. Is made capable. Help is available. |
Financial accounting is a branch of
accounting that deals with summarizing, recording, and reporting the
financial transactions that occur in a business entity over a period of time. |
|
Type of documented information |
Documenting data related to labor and
materials used in the manufacturing process. |
Document figures that are in monetary
terms. |
|
Stock estimation |
Stock value is estimated at cost. |
Stock value is estimated based on the
lower of net realizable value or cost. |
|
Profit analysis |
Generally, profit is examined for a
specified job, batch, product and process. |
The profits, income and expenses of the
entire business concern are examined together for a specific period. |
|
Primary commodity |
controlling and reducing costs. |
Towards maintaining complete records of
financial transactions. |
The main
points are the differences between cost and financial accounting:-
(i)
Objective: The primary objective of financial accounting is to provide
essential financial information about a business to external users such as
investors, creditors and regulators. In contrast, cost accounting primarily
provides data to help internal managers make operational and strategic planning
decisions.
(ii)
Regulation: Financial accounting is governed by Generally Accepted
Accounting Principles (GAAP) or International Financial Reporting Standards
(IFRS), which are enforced by external agencies. Cost accounting, on the other
hand, does not have any specific set of rules or standards, and it varies from
company to company depending on internal requirements.
(iii) Scope:
Financial accounting looks at the company as a whole. It focuses on building a
holistic picture of the financial health of the entire business. However, cost
accounting focuses on individual activities or processes, analyzing the costs
of products, departments or projects.
(iv) Time
frame: Financial accounting is periodic in nature – it is generally done on
quarterly or annual basis. In contrast, cost accounting is done more frequently
(daily, weekly or monthly) to provide regular input for management decisions.
(v)
Reporting: The reports prepared by financial accounting are mandatory and
must be reported publicly. In contrast, cost accounting reports are
confidential and meant only for the use of the company's management.
2. Discuss classification of costs on the basis of
variability with one example of each. 10
Ans:- According to variability, costs can be
classified into three groups: fixed, variable and semi-variable.
Variable costs
are expenses that change depending on a company's production and sales. They
increase when production increases and decrease when production decreases.
Examples of variable costs include:
Direct material
costs, direct wages, direct expenses, consumable stores, commission on sales,
labour, utility expenses, raw materials, electricity, repairs.
Fixed costs are
those costs which generally remain unaffected by changes in sales
volume/production. Examples of fixed costs include: rent, salaries, insurance,
taxes.
Cost accounting
is a form of managerial accounting that aims to capture a company's total cost
of production.
The
classification of costs is as follows:-
(A)
Classification by Nature:- This is analytical classification of costs. Let
us divide according to their nature. So basically there are three broad
categories according to this classification, namely labor cost, material cost
and expenses. These headings make it easier to classify costs in the cost
sheet. They help in ascertaining the total cost and determining the cost of
work in progress.
(i) Material
cost: Material cost is the cost of any material that we use in making
goods. We break down these costs further. For example, let's divide the
material cost into cost of raw materials, spare parts, cost of packaging
materials, etc.
(ii) Labor
Cost: Labor cost includes salaries and wages paid to permanent and temporary
employees for manufacturing goods.
(iii)
Expenses: All other expenses associated with making and selling goods or
services.
(B)
Classification by functions:- This is functional classification of costs.
Therefore classification follows the pattern of basic managerial activities of
the organisation.
Grouping of
costs takes place according to broad division of functions like production,
administration, sales etc.
(i) Production
costs: All costs relating to the actual manufacturing or manufacture of
goods
(ii)
Commercial Cost: The total cost of operating an enterprise excluding
manufacturing costs. This includes admin costs, selling and distribution costs,
etc.
(C)
Classification by Traceability:- This aspect is one of the most important
classification of costs into direct costs and indirect costs. This
classification is based on the degree of traceability of the firm's final
product.
(i) Direct
costs: So these are those costs which can be easily identified from a
specific cost unit or cost centres. Some of the most basic examples are the
materials used in manufacturing a product or the labor involved in the
production process.
(ii) Indirect
costs: These costs are incurred for multiple purposes, i.e. between
multiple cost centers or units. Therefore we cannot easily identify them to a
particular cost centre. Take for example building rent or a manager's salary.
We will not be able to determine how to derive such costs for a particular cost
unit.
(D)
Classification by normality:- This classification determines the costs as
normal costs and abnormal costs. Normal cost parameters are those costs that
would normally occur at a given level of output under the same conditions in
which that level of output occurs.
(i) Normal
cost: It is a part of production cost and cost is a part of profit and
loss. These are the costs that the company incurs at normal levels of
production under standard circumstances.
(ii) Abnormal
costs: These costs are generally not incurred at a given level of output in
situations where there is a normal level of output. These costs are taken from
the profit and loss account, they are not part of the production cost.
3. Write short notes on any two of the following: 5+5
(a) Cost centre
(b) Purchase
order
(c) Overtime
(d)
Over-absorption of factory overheads
[COMING SOON]
***
ELEMENTS OF COSTING SOLVED PAPERS PAGE LINK - Click here
IGNOU PAGE LINK - CLICK HERE
Also Read: