1. What is cost centre?

Cost centre is defined as a location, machine, person, department, division, or any equipment or group of these, in relation to which direct and indirect costs may be ascertained and used for the purpose of cost control. Thus, an organisation for the costing purposes is divided in convenient units and one of the convenient units is known as cost centre. Example: collecting, sorting, washing of clothes are the various activities which are separate cost centre in a laundry. The cost centre facilitates this function of cost control. Thus, correct identification of cost centre is a prerequisite for the successful implementation of cost accounting process. This also facilitates the fixation of responsibility in the correct manner.

2. What is the difference between costing and cost accounting?

Costing is the process of ascertaining costs whereas cost accounting is the process of recording various costs in a systematic manner, in order to prepare statistical date to ascertain cost.

3. Explain what are the objects of Cost Accountancy?

Following are the objects of Cost Accountancy:

-Ascertainment of Cost and Profitability
-Determining Selling Price
-Facilitating Cost Control
-Presentation of information for effective managerial decision
-Provide basis for operating policy
-Facilitating preparation of financial or other statements

4. Do you know what is cost accountancy?

Cost accountancy is the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability as well as the presentation of information for the purpose of managerial decision making.

5. What is Indirect Cost?

Indirect Cost are all the expenses which cannot be identified with the individual product, service or job cost centre. The totals of indirect costs are termed as overheads. Example: salaries of storekeepers, foremen, work manager's salary etc.

6. What is Direct Cost?

Direct Cost are all the expenses which can be identified with the individual product, service or job cost centre. In the manufacturing process of products, materials are purchased, labours are hired and wages are paid to them. All these take active and direct part in the manufacturing process.

7. Compare Production and service cost centres?

Production Cost Centre: is the place where the production activity is carried on. Example of Production Cost Centre: a assembly shop, a paint shop etc.

Service Cost Centre: is the place where all types of assistance are given to the production activities. Example of Service Cost Centre: the store department, the labour office, the account/costing department etc.

8. Compare Impersonal and personal cost centers?

Impersonal Cost Centre: consist items of impersonal nature like an equipment or location. Example of Impersonal Cost Centre: a department, a branch, a region of sale, etc.

Personal Cost Centre: consist items of personal nature like a person or a group of persons. Example of Personal Cost Centre: Regional Manager, Sales Manager, Marketing Manger, etc.

9. What is Uncontrollable Cost?

Uncontrollable Cost are the costs which cannot be influenced by the action of a specified member of the undertaking. For example: a foreman incharge of a tool room can only control costs pertaining to the same department and the matters which come directly under his control, not the costs apportioned to other department. The expenditure which is controllable by an individual may be uncontrollable by another individual.

10. What is Controllable Cost?

Controllable Cost are the costs which can be influenced by the action of a specified member of the undertaking. They are incurred in a particular responsibility centres can be influenced by the action of the executive heading that responsibility centre. For example: Direct labour cost, direct material cost, direct expenses controllable by the shop level management.

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