Frequently Questions on Cost Accounting

1. What is Cost Accounting?

Cost accounting means tracking, recording and analyzing costs in a business. It helps you to understand how much cost is incurred to make a product or to provide a service. 

2. What is overhead in cost accounting?

Overheads in cost accounting are additional costs that are not directly connected to producing a product or service. It includes rent, utilities, or salaries for non-production staff.

3. What do you mean by cost accounting?

Cost accounting means recording, tracking and analyzing the cost of a business in delivering a product or service. It gives an idea how much money is incurred in producing a unit of good or service.

4. What is the meaning of cost accounting?

Cost accounting is the method of determining how much money is invested in producing goods or offering services. It’s really useful in pricing and product or service budgeting.

5. What is cost accounting with an example?

The main aim of cost accounting is to track expenses of any kind so that the costing of a product or a service can be calculated. For example, if a bakery is spending Rs. 200 (cost price) on flour, sugar and labour to make a cake, and is selling at Rs. 300. The difference between selling and cost price is the profit.

6. What is idle time in cost accounting?

In cost accounting, idle time refers to non-productive time of workers or machines, not doing any work. It includes, machine breakdown, machine maintenance, and breaktime for workers, etc.

7. What is a bin card in cost accounting?

Bin card is a record that tracks inventory in a warehouse. It records stocks on racks, stocks used and what is left. 

8. What is cost accounting in simple words?

It is a simple method to keep a track of all expenses in a business, such as labour cost, material cost and other overheads. 

9. What is a cost sheet in cost accounting?

A cost sheet is a report card for costs where all expenses are listed to calculate the total cost of producing something.

10. What is EOQ in cost accounting?

The term EOQ stands for Economic Order Quantity. It is a mathematical concept, having a formula, which is used to derive the right amount of inventory to order.

11. What are the objectives of cost accounting?

• Control costs to avoid overspending.
• Help set prices that make profit.
• Plan budgets better.
• Spot areas to save money.
• Make business decisions smarter.

12. What is the contribution in cost accounting?

Contribution in cost accounting means that the money left after subtracting variable costs from sales. It helps you to find fixed costs and then adds to profit.

13. What is the cost unit in cost accounting?

A cost unit is a mathematical way to calculate cost for one item or service.

14. What is labour turnover in cost accounting?

Labour turnover is hiring and firing of a new employee. If the labour turnover is high, then there is more cost in hiring and training.

15. What is marginal costing in cost accounting?

Marginal cost in cost accounting refers to how much the costs are in producing one unit. It only considers variable cost and ignores fixed costs.

16. What is unit costing in cost accounting?

Unit costing is figuring out the cost of making one single product. Like, if a factory makes chairs, it calculates the cost per chair. Super straightforward.

17. What is ABC analysis in cost accounting?

According to the ABC analysis principle, inventory is classified into three categories, i.e A (high value items), B (medium value) and C (low value).

18. What is the cost accounting definition?

Cost accounting is the process of recording, tracking and analyzing all the costs of the business, in order to minimize them and maximize the financial effectiveness of the company.

19. What is material control in cost accounting?

Material control is the measure that allows you to hold the optimum inventory—neither too high nor too low. The measure involves tracking inventory, ordering smart, and avoiding waste.