Interview Questions.

Question 1. What Is A Flexible Budget?

Answer :

A bendy price range is a budget that adjusts or flexes for adjustments in the quantity of pastime. The bendy price range is more state-of-the-art and useful than a static finances, which remains at one quantity irrespective of the quantity of pastime.

Assume that a producer determines that its cost of power and components for the factory are about $10 consistent with device hour (MH). It additionally knows that the manufacturing unit supervision, depreciation, and other fixed expenses are approximately $40,000 in keeping with month. Typically, the production system operates among four,000 and 7,000 hours in keeping with month. Based in this statistics, the bendy price range for every month might be $forty,000 + $10 in keeping with MH.

Now allow's illustrate the flexible budget by means of the usage of a few records. If the manufacturing gadget is needed to operate for 5,000 hours in the course of January, the bendy price range for January might be $90,000 ($40,000 fixed + $10 x 5,000 MH). If the system is required to function in February for six,three hundred hours, then the flexible price range for February can be $103,000 ($forty,000 fixed + $10 x 6,three hundred MH). If March requires handiest 4,a hundred device hours, the bendy finances for March may be $eighty one,000 ($40,000 fixed + $10 x four,a hundred MH).

If the plant supervisor is required to use greater gadget hours, it's miles logical to growth the plant manager's finances for the extra price of strength and supplies. The supervisor's budget should also lower whilst the need to perform the system is decreased. In short, the flexible budget provides a better opportunity for making plans and controlling than does a static budget.

Question 2. What Is Cost Accounting?

Answer :

Cost accounting includes the techniques for:

figuring out the prices of products, processes, initiatives, and many others. On the way to report the best quantities at the economic statements, and
assisting management in making selections and in the making plans and manipulate of an agency.
For example, fee accounting is used to compute the unit value of a producer's merchandise for you to document the fee of inventory on its stability sheet and the fee of goods bought on its profits assertion. This is done with techniques along with the allocation of manufacturing overhead fees and through the usage of technique costing, operations costing, and process-order costing systems.

Cost accounting assists control through providing analysis of fee conduct, value-extent-profit relationships, operational and capital budgeting, popular costing, variance analyses for expenses and revenues, transfer pricing, activity-based totally costing, and extra.

Cost accounting had its roots in manufacturing corporations, but these days it extends to carrier groups. For example, a financial institution will use price accounting to determine the value of processing a purchaser's take a look at and/or a deposit. This in turn may additionally provide control with steerage inside the pricing of those services.

General Accounting Interview Questions
Question three. What Is Absorption Costing?

Answer :

Absorption costing approach that every one of the producing fees are absorbed through the devices produced. In other phrases, the price of a completed unit in stock will encompass direct materials, direct exertions, and each variable and fixed manufacturing overhead. As a end result, absorption costing is also known as full costing or the overall absorption technique.

Absorption costing is regularly contrasted with variable costing or direct costing. Under variable or direct costing, the constant manufacturing overhead expenses aren't allotted or assigned to (now not absorbed by using) the goods manufactured. Variable costing is frequently useful for control's selection-making. However, absorption costing is needed for external monetary reporting and for profits tax reporting.

Question 4. What Is Job Order Costing?

Answer :

Job order costing or activity costing is a system for assigning manufacturing expenses to an person product or batches of products. Generally, the activity order costing machine is used best when the products manufactured are sufficiently one of a kind from every other. (When products are equal or nearly equal, the manner costing system will possibly be used.)

Since there's a giant variant in the goods synthetic, the activity order costing gadget will create a process price document for every item, job or unique order. The activity value file will report the direct substances and direct hard work absolutely used plus the manufacturing overhead assigned to every task.

An instance of an enterprise in which job order costing is used is the constructing creation industry for the reason that every constructing is specific. The manufacturers of custom equipment or custom cabinetry also are examples of businesses so that it will keep tune of manufacturing costs by using object or job.

The task cost facts also serve as the subsidiary ledger or documentation for the value of the paintings-in-system inventory, the finished items stock, and the fee of goods bought.

Accounting Basics Tutorial
Question five. What Is The Difference Between Actual Overhead And Applied Overhead?

Answer :

In accounting, overhead generally refers to the oblique manufacturing costs. These are the producing charges apart from direct materials and direct labor.

The real overhead refers back to the indirect production prices genuinely going on and recorded. These include the manufacturing costs of electricity, fuel, water, lease, property tax, production supervisors, depreciation, upkeep, preservation, and greater.

The carried out overhead refers back to the oblique production expenses that have been assigned to the goods synthetic. Manufacturing overhead is typically carried out, assigned, or allotted with the aid of the use of a predetermined annual overhead rate. For example, a producer may estimate that in its upcoming accounting yr there may be $2,000,000 of manufacturing overhead and forty,000 gadget hours. As a result, this manufacturer units its predetermined annual overhead rate at $50 consistent with system hour.

Since the future overhead costs and future wide variety of gadget hours had been now not regarded with truth, and because the real system hours will now not occur uniformly in the course of the 12 months, there'll continually be a difference between the real overhead charges incurred and the quantity of overhead carried out to the manufactured items. Hopefully, the differences could be minimal on the quit of the accounting yr.

Cost Accounting Interview Questions
Question 6. What Are Direct Costs?

Answer :

Direct costs may be traced without delay to a price object including a product or a branch. In other phrases, direct fees do now not ought to be allotted to a product, branch, or different value item.

For instance, if a corporation produces artisan furnishings, the price of the wooden and the price of the craftsperson are direct charges—they may be sincerely traceable to the manufacturing department and to each item produced—no allocation turned into wanted. On the alternative hand, the lease of the building that houses the manufacturing vicinity, warehouse, and office is not a right away fee of both the manufacturing branch or the gadgets produced. The rent is an oblique price—an oblique price of running the production branch and an oblique price of crafting the product.

To calculate the full value of the production branch or to calculate each product's total cost, it is important to allocate a number of the hire (and different indirect expenses) to the department and to the product.

Question 7. What Are Manufacturing Costs?

Answer :

Manufacturing charges are the expenses essential to convert raw materials into merchandise. All production costs ought to be connected to the gadgets produced for external economic reporting beneath US GAAP. The ensuing unit fees are used for inventory valuation at the balance sheet and for the calculation of the fee of products offered at the profits declaration.

Manufacturing expenses are generally divided into three classes...

Direct materials. This is the value of the materials which become part of the completed product. For instance, the fee of wooden is an instantaneous material in the manufacture of wood fixtures.
Direct labor. This is the cost of the wages of the those who are bodily worried in changing uncooked materials into a finished product. For example, the wages of the man or woman slicing wooden into the desired lengths and the wages of the assemblers are direct hard work fees in a furnishings manufacturing facility.
Factory overhead or production overhead. Factory overhead refers to all other fees incurred within the production interest which can not be at once traced to bodily devices in an economically possible manner. The wages of the individual that inspects the finished furniture and the depreciation on the manufacturing facility system are part of the manufacturing unit overhead charges. Factory overhead is also described as oblique manufacturing charges.
Business Negotiation Skills Tutorial Procurement Interview Questions
Question 8. What Is Variance Analysis?

Answer :

In accounting, a variance is the difference between an predicted or deliberate quantity and an real quantity. For example, a variance can arise for items contained in a branch's cost record. Variance evaluation attempts to identify and give an explanation for the reasons for the difference between a budgeted amount and an actual quantity.

Variance analysis is commonly related to a producer's product costs. In this setting, variance analysis attempts to identify the causes of the variations between a producer's 1) fashionable charges of the inputs that should have occurred for the real merchandise it synthetic, and a couple of) the real prices of the inputs used for the actual merchandise synthetic.

To illustrate, permit's anticipate that a agency manufactured 10,000 units of product (output). The employer's standards suggest that it ought to have used $40,000 of substances (an enter), however it genuinely used $forty eight,000 of materials. This adverse variance wishes to be analyzed. A common variance analysis will divide the $eight,000 into a charge variance and a quantity variance. The price variance identifies whether or not the agency paid too much for each unit of enter. (Perhaps it paid extra in line with pound of the enter than it had deliberate.) The amount variance identifies whether the organisation used an excessive amount of of the enter. (Perhaps it used too many kilos of the uncooked substances for the variety of merchandise it manufactured.)

Variance analysis for production overhead costs is extra complicated than the variance evaluation for substances. However, the variance evaluation of producing overhead fees may be very essential as production overhead fees have become a totally huge percent of a product's costs.

Question 9. What Is The Difference Between Normal Costing And Standard Costing?

Answer :

Normal costing is used to price synthetic products with the actual materials fees, the actual direct labor fees, and manufacturing overhead based totally on a predetermined manufacturing overhead price. These 3 costs are called product costs and are used for the cost of products bought and for stock valuation. If there may be a difference between 1) the overhead costs assigned or implemented to products, and a couple of) the overhead expenses surely incurred, the difference is known as a variance. If the amount of the variance is not great, it'll commonly be assigned to the value of goods sold. If the variance is tremendous, it need to be prorated to the fee of goods bought and to the paintings in process and finished items inventories.

Standard costing values its synthetic products with a predetermined substances price, a predetermined direct labor price, and a predetermined manufacturing overhead value. These trendy costs might be used for valuing the producer's value of goods bought and inventories. If the actual charges range most effective barely from the same old fees, the resulting variances can be assigned to the cost of products bought. If the variances are substantial, they ought to be prorated to the cost of goods offered and to the inventories.

Finance Interview Questions
Question 10. What Do Negative Variances Indicate?

Answer :

Accountants regularly use negative amounts to signify an adverse variance. For instance, if actual sales are less than the budgeted revenues, the variance (or distinction) will be shown as a bad amount. The motive is that having less sales than planned isn't always properly. On the other hand, if real prices are less than the budgeted quantity of costs, the variance can be proven as a superb quantity. The reason is that fewer real expenses than budgeted is favorable (or suitable, nice).

Let's illustrate this further with an example. Assume that a organization had the following real amounts in a recent week: revenues $750, fees $525, internet income $225. For the same week, the organisation had budgeted the subsequent quantities: revenues $900, costs $seven-hundred, net profits $2 hundred. The assessment of actual to finances resulted in the following variances:

Revenues variance:  damaging $150.   Presented as (a hundred and fifty).
Expenses variance:  favorable $a hundred seventy five.   Presented as one hundred seventy five.
Net earnings variance:  favorable $25.   Presented as 25.
The internet income variance is favorable due to the fact the favorable rate variance became $25 more than the damaging sales variance. The favorable $a hundred seventy five variance surpassed the destructive $150 variance resulting in the internet variance of $25 favorable.

Our example indicates that the high quality and negative symptoms for the variances are logical in case you recognition is on the company's net income. In other phrases, ask yourself one of the following questions:

"Is the distinction among the actual and the budgeted quantities right or bad as a ways because the business enterprise's net earnings?"
"Is the variance favorable or unfavorable as a long way because the business enterprise's net income?"
"Does the difference have a superb or terrible impact at the company's internet profits?"
To help others, it may be beneficial to signify for your report "( ) = an negative effect on internet profits."

Question eleven. What Is Inventory Shrinkage?

Answer :

Inventory shrinkage is the term used to describe the lack of inventory. For example, if the stock records of a store document that three,261 units of Product X are reachable, however a bodily count number suggests that there are best 3,248 gadgets available, there's an stock shrinkage of 13 devices. The store's inventory shrinkage might be due to shoplifting, employee robbery, damage, obsolescence, and many others.

The time period shrinkage is likewise used by manufacturers while referring to the loss of raw substances at some stage in a manufacturing system. For example, a manufacturer of baked food items will enjoy shrinkage in the course of its strategies because of components adhering to the beaters and bowls, and also due to evaporation. This shrinkage is also called spoilage or waste and it can be either ordinary or abnormal.

Budgetary Control Interview Questions
Question 12. What Are Indirect Manufacturing Costs?

Answer :

Indirect manufacturing fees are a producer's product fees aside from direct substances and direct hard work. Indirect manufacturing charges are also known as production overhead, factory overhead, factory burden, or burden.

Under traditional fee accounting, the oblique production expenses are allocated (or spread) to the goods synthetic based on direct exertions hours, direct exertions fees, or production system hours. However, in latest a long time the oblique manufacturing fees have multiplied notably and are less possibly to be as a result of the quantity of direct labor or manufacturing machine hours. (This might not be a trouble for economic reporting if the quantity of inventory is continually small, however it may be a problem for pricing and other choices.)

Examples of oblique production prices consist of:

depreciation, upkeep and upkeep, electricity, etc. For the manufacturing centers and gadget
salaries, wages and fringe advantages of the oblique production employees which include manufacturing supervisors, fabric handlers, best warranty, and different manufacturing unit assist personnel
manufacturing unit supplies, outdoor services touching on production, and other production associated charges.
General Accounting Interview Questions
Question 13. What Is Relevant Range?

Answer :

In accounting, applicable range refers to a restrained span of quantity or hobby. To illustrate, permit's count on that a manufacturer's month-to-month production volume is continuously between 10,000 and thirteen,000 devices and between 20,000 and 25,000 device hours. Within this range of interest it operates easily with the identical quantity of monthly fixed charges (say $two hundred,000) for supervisors, lease, depreciation, and many others. If the volume were to drop beneath this variety, the organization would reduce the variety of supervisors, the distance rented, and so forth. In order that its overall monthly constant expenses might be smaller. If the quantity exceeds the range, the organisation could incur additional fixed charges for more supervisors, area, and so on. Hence, this business enterprise's relevant variety of interest is 10,000 to thirteen,000 devices of product or 20,000 to 25,000 device hours. It is best on this applicable variety that the month-to-month constant costs are $2 hundred,000.

There are also relevant ranges for variable expenses and selling expenses. Volume that is decrease and/or higher than the respective applicable range can suggest specific variable costs in step with unit and different selling costs according to unit.

In brief, cost behavior and pricing is complicated. In order to simplify the evaluation accountants will often count on that charges and promoting prices are linear inside the slender band of interest known as the applicable variety.

Question 14. What Is A Cost Variance?

Answer :

Generally a cost variance is the difference between a value's real amount and its budgeted or planned amount. For instance, if a company had actual repairs cost of $950 for May however the budgeted amount changed into $800, the company had a value variance of $one hundred fifty. Since the actual fee changed into greater than the budgeted quantity, the value variance is stated to be negative. When an real value is less than the budgeted amount, the value variance is stated to be favorable.

Cost variances are a key part of the usual costing system utilized by many producers. In this type of device the cost variances give an explanation for the difference between 1) the standard, predetermined and predicted charges of the good output, and a couple of) the actual production charges incurred. These fee variances send an early sign to management that the organization is experiencing actual costs which are different from the corporation's plan. Standard costing structures will report not less than  cost variances for each of the subsequent manufacturing expenses: direct materials, direct labor and production overhead.

Question 15. What Is The Difference Between A Budget And A Standard?

Answer :

A budget usually refers to a department's or a employer's projected revenues, expenses, or prices. A standard normally refers to a projected quantity in keeping with unit of product, in line with unit of input (such as direct materials, manufacturing facility overhead), or in keeping with unit of output.

For instance, a producer will have budgets for its manufacturing or factory overhead departments. Let's assume that the budgeted manufacturing overhead for the imminent yr is expected to be $a million in order to produce the anticipated one hundred,000 same units of product. The standard price of manufacturing overhead in step with unit of product is $10 ($a million divided with the aid of one hundred,000 gadgets). When the goods are not same, the $1,000,000 of manufacturing overhead might be divided by using the anticipated number of machine hours required to manufacture the devices of product. Assuming it's going to take 50,000 device hours, the same old price of the manufacturing overhead might be $20 per machine hour ($one million divided by means of 50,000 machine hours).

Marginal price Interview Questions
Question 16. What Is Direct Labor?

Answer :

Direct exertions refers back to the employees and temporary assist who work directly on a producer's products. (People running inside the production vicinity, but not directly on the goods, are known as indirect hard work.)

The direct hard work fee is 1) the price of the wages and fringe benefits of the direct exertions employees and a pair of) the price of the temporary assist who paintings at once on the manufacturer's products.

The direct hard work price is also described as:

a product cost (together with the charges of the direct materials and production overhead)
an inventoriable value (together with the costs of the direct materials and manufacturing overhead)
a high price (in conjunction with direct substances)
a conversion cost (at the side of production overhead)
Question 17. What Are Direct Materials?

Answer :

Direct substances are the traceable rely utilized in production a product. The direct substances for a manufacturer of dessert products will include flour, sugar, eggs, milk, vegetable oil, spices, and other substances within the recipes. In manufacturing, the direct materials are indexed in every product's bill of substances. (Indirect materials including oil for greasing the baking pans, etc. Will probable be considered as part of the producing supplies and may be allocated to merchandise at the side of other production overhead.)

The direct substances contained in manufactured products are also defined as:

a product fee (along side the costs of the direct hard work and manufacturing overhead)
an inventoriable price (along with the expenses of direct exertions and manufacturing overhead)
a high fee (at the side of the cost of direct hard work) The expenses of direct materials must be suggested inside the monetary statements in line with their vicinity or role:
if no longer yet put into manufacturing, file as uncooked substances stock on the stability sheet
if placed into production but the goods are not finished, file as a part of the price of work-in-procedure inventory on the balance sheet
if placed into manufacturing and the goods are completed but now not yet offered, file as a part of the value of the finished items inventory at the balance sheet
if positioned into manufacturing and the goods have been completed and offered, record as a part of the cost of products offered on the income statement
Material value Interview Questions
Question 18. What Is The Difference Between Cost And Price?

Answer :

Some humans use cost and price interchangeably. Others use the time period price to intend one element of a product's selling price. Even the same man or woman may use the phrases otherwise.

For example, in fashionable costing the price variance of the uncooked substances refers back to the difference between the usual price and the real cost of the materials.

In other situations we define a product's selling rate as: product charges + expenses + profit.

As those two examples imply, there can be extraordinary meanings for the terms value and fee.

Cost Accounting Interview Questions
Question 19. What Is A Standard Cost?

Answer :

A widespread value has been defined as a predetermined value, an anticipated destiny price, an expected price, a budgeted unit cost, a forecast value, or a "must be" price. Standard expenses are often part of a manufacturer's annual earnings plan and running budgets. Standard expenses could be established for the subsequent 12 months's direct substances, direct labor, and production overhead. If preferred prices are used, there might be:

a fashionable cost for every unit of enter (e.G., $20 in line with hour of direct hard work)
a trendy quantity of each enter for every unit of output (e.G., 2 hours of exertions for every product)
a popular fee for each unit of output (e.G., $20 X 2 hours = $40 of direct exertions according to product)
Under a widespread price system, the standard expenses of the producing activities may be recorded inside the inventories and the value of goods bought accounts. Since the agency have to pay its carriers and production employees the real costs incurred, there are probable to be a few variations. The distinction among the usual prices and the actual production prices is known as a price variance and can be recorded in separate variance money owed. Any stability in a variance account shows that the corporation is deviating from the amounts in its profit plan.

While fashionable charges may be a useful control device for a producer, its external monetary statements ought to follow the value principle and the matching precept. Therefore, huge variances have to be reviewed and properly said as a part of the price of goods offered and/or inventories.

Question 20. What Is Managerial Accounting?

Answer :

Managerial accounting is likewise known as control accounting and it includes a number of the topics located in fee accounting.

Some managerial accounting topics recognition on computing a producer's product fees which might be wished for the external financial statements. For example, the manufacturer's income announcement must record the real price of the goods bought, and its balance sheet have to file the real expenses in its ending inventories. The managerial accounting subjects wanted for those calculations encompass: product vs. Length expenses, process order costing, procedure costing, allocation of producing overhead, costing of joint merchandise, and greater.

Other managerial accounting topics are greater beneficial for making plans and controlling a commercial enterprise and in helping management make economic choices. These subjects encompass:

know-how value conduct and fee-quantity-profit evaluation
operational budgeting and capital budgeting
fashionable costing and variance evaluation
hobby based totally costing
pricing of person products and services
reading the profitability of product lines, customers, territories, etc.
The appropriate and relevant amounts for those topics will probable be unaudited, estimated, and destiny quantities (as opposed to the past, sunk fees observed inside the popular ledger). Management's awareness on those managerial accounting topics can make a distinction in a company's profitability.

Activity Based Costing Interview Questions
Question 21. What Is The Meaning Of A Favorable Budget Variance?

Answer :

A favorable price range variance shows that an actual end result is better for the organization (or other company) than the amount that was budgeted.

Here are 3 examples of favorable finances variances:

Actual revenues are greater than the budgeted or deliberate revenues.
Actual costs are much less than the budget or plan.
Actual production fees are less than the amount budgeted for the period.
Occasionally, a favorable price range variance for sales might be analyzed to determine whether or not it was the result of higher than deliberate selling expenses, greater quantities, or a more favorable mix of items offered.

Question 22. What Is The Meaning Of Fixed Overhead Absorbed?

Answer :

This word is used in value accounting and entails the assigning, applying, or allocating of constant production overhead fees to the devices produced by using a producer.

Three examples of fixed production overhead costs consist of 1) depreciation of the manufacturing equipment, 2) the property tax at the manufacturing unit building, and 3) the salaries of the factory supervisors. Each of those fees is available in large dollar amounts (they do not arise at a rate of say $1.00 in keeping with unit) and none is at once traceable to the goods manufactured. The dollar quantity of each of these charges will in all likelihood no longer trade if the agency produces 10% more devices or 10% fewer units.

Because the fixed production overhead fees are oblique product charges (now not immediately traceable to the products) the accountant allocates (or assigns or applies) those charges to the goods on some basis—perhaps on the premise of system hours or through pastime-based costing. While the accountant assigns or allocates those prices, the goods are said to be absorbing these fixed manufacturing prices. (Absorption costing, that is required for external economic statements, way that every product's value includes direct substances, direct hard work, variable manufacturing overhead, and fixed production overhead.)

Fixed manufacturing overhead cost is normally carried out to the products (and is absorbed by using the goods) through the use of a predetermined annual overhead rate this is primarily based on some deliberate volume of production. If the real product volume is less than the planned quantity (and the costs are as deliberate) the constant production overhead may be underabsorbed. When the real volume exceeds the planned volume and the charges are as planned, the fixed production overhead will be overabsorbed.

Question 23. In Standard Costing, How Is The Purchase Price Variance Reclassified To Arrive At Actual Cost?

Answer :

I expect that the acquisition price variance turned into recorded at the time that the uncooked substances were bought. If that rate variance is great, it must be reclassified to the subsequent: raw materials stock, work-in-process inventory, completed goods inventory, and price of products sold. The reclassification is also referred to as prorating the variance or allocating the variance.

The reclassification of the acquisition fee variance need to be based totally on the region of the uncooked substances which had created the fee variance. If the ones uncooked substances have been recently purchased and are totally inside the raw substances stock, then all of the price variance ought to be assigned to the raw materials inventory. If the price variance took place at some stage in the yr, the variance must be assigned to the raw substances stock, paintings-in-technique stock, completed goods inventory, and cost of goods bought primarily based on the quantity of the raw materials in each of these categories.

If the amount of the purchase fee variance is very small and/or the stock turnover fees are very excessive, the whole amount of the rate variance is probably reclassified absolutely to the price of goods bought.

Material Cost Control Interview Questions
Question 24. What Is A Learning Curve?

Answer :

A commonplace gaining knowledge of curve suggests that the cumulative average time to finish a manual venture which involves studying will decrease 20% whenever extent doubles. This is known as an 80% gaining knowledge of curve.

Let's illustrate the 80% studying curve with a person learning to design and code web sites of similar length and complexity. If the primary website takes one hundred hours, then after the second website the cumulative average time may be 80 hours (80% of one hundred hours). The cumulative average of 80 hours includes 100 hours for the primary internet site plus only 60 hours for the second one internet site resulting in a complete of a hundred and sixty hours divided via 2 web sites. After the fourth internet site the cumulative average time will be sixty four hours (80% of 80 hours). After the 8th website the cumulative average might be 51.2 hours (eighty% of 64 hours). In different phrases, the whole time to have finished all 8 web sites might be 409.6 hours (8 websites times a mean time of 51.2 hours).

Improvements in generation can imply time and fee reductions beyond those inside the learning curve. For example, software might also emerge as to be had to help within the design and coding, computer processing speeds may boom, there can be lower fees of processing and storage, etc.

The mastering curve is crucial for putting standards, estimating fees, and setting up promoting expenses.

Procurement Interview Questions
Question 25. What Is A Fixed Cost?

Answer :

A constant fee is one that does not trade in general inside an affordable variety of pastime. For instance, the rent for a manufacturing facility is a set fee if the hire will not alternate whilst there are affordable adjustments in the quantity of output or input. (Of route, if there may be a want to double the output the lease will trade while the business enterprise occupies extra paintings space.)

While a hard and fast price remains steady in general, the constant fee consistent with unit of output or enter will exchange inversely with the alternate in the quantity of output or input. For example, if the hire of the production facility is constant at $a hundred and twenty,000 in step with year and there are 30,000 device hours of excellent output all through the yr, the hire could be $4 ($a hundred and twenty,000/30,000) consistent with machine hour. If there are forty,000 device hours during the yr, the lease can be $three ($120,000/forty,000) in keeping with machine hour.

Many production overhead fees are fixed and the amounts arise in huge increments. Some examples include depreciation on a corporation-owned manufacturing facility, depreciation on equipment and gadget, salaries and blessings of manufacturing supervisors, factory management prices, etc. One task for accountants is the allocation or assigning of the huge constant prices to the person units of product (which probable vary in size and complexity). This allocation (or assigning or absorbing) is needed through the accounting and income tax guidelines for valuing inventories and the value of goods bought. If the fixed overhead is assigned using gadget hours, one must take into account that the fee price consistent with machine hour isn't always how the constant costs behave or arise. In our example, the price of the lease is probably assigned to the goods at the fee of $three or $4 consistent with system hour but the rent clearly takes place at the rate of $10,000 in line with month.

Question 26. What Does The Direct Labor Efficiency Variance Tell Us?

Answer :

This variance tells us how green the direct labor was in making the actual output that changed into produced via the direct exertions.

The direct hard work performance variance compares the standard hours that it must have taken to make the actual output Vs. The real hours it took and multiplies the difference in hours by way of the standard value per direct labor hour.

Here's an example with amounts. Let's assume the same old for direct labor is 3 hours in keeping with unit of output and the same old cost for an hour of direct exertions is $10. Let's say the output for the length is 6,000 units and the actual direct exertions hours had been 18,four hundred hours and the exertions earned $10.30 consistent with hour. The preferred direct labor cost for the actual output have to were 18,000 hours (6,000 devices of output times 3 general hours) at $10 in line with hour for a total of $a hundred and eighty,000. The actual direct exertions fee became $189,520 (18,400 hours at $10.30 consistent with hour). This approach a TOTAL (efficiency and charge) variance of $9,520. Some of that variance is due to the rate being $0.30 too much and some of that variance is because of the direct labor the usage of too many hours—no longer being green.

The direct exertions efficiency variance specializes in the direct hard work hours: 6,000 gadgets of output should have taken 3 hours every for a complete of 18,000 direct labor hours. The real direct exertions hours were 18,400 hours. This approach there was an unfavourable direct hard work efficiency variance of four hundred hours times the usual price of $10 for a complete of $four,000.

The direct exertions rate variance is the $0.30 adverse variance inside the hourly price ($10.30 real charge Vs. $10.00 popular price) times the 18,400 actual hours for an detrimental direct exertions charge variance of $five,520.

The aggregate of the unfavourable direct exertions performance variance of $four,000 + the unfavourable direct exertions fee variance of $5,520 is the total negative direct exertions variance of $nine,520.

SAP Product Costing Interview Questions
Question 27. What Is The Materials Usage Variance?

Answer :

The materials usage variance, which is likewise referred to as the materials amount variance, is associated with a wellknown costing system. The materials usage variance outcomes when a organisation uses more or much less than the standard amount of substances (enter) that ought to were used for the products surely manufactured (the coolest output).

The materials utilization variance is detrimental when the real quantity of materials used passed the standard amount of materials. The substances usage variance is favorable while the actual quantity of materials used became much less than the same old amount. In the U.S. The materials utilization variance is expressed in bucks, that's calculated via multiplying the favorable or unfavorable quantity (together with pounds) instances the standard fee in line with pound.

To illustrate, permit's expect that a enterprise has a standard of 5 pounds of materials to provide one unit of output. The agency also established that the standard price in keeping with pound of the substances is $3 consistent with pound. If the employer produced one hundred devices of output, the employer need to have used 500 kilos of enter (one hundred gadgets of appropriate output X five kilos of input in keeping with unit of output). If the enterprise virtually used 530 kilos of input, the substances usage variance can be $ninety adverse (30 pounds of additional input X the usual price according to pound of $three). The $90 negative substances utilization variance can be defined with the aid of the subsequent: $1,590 (530 real pounds used X $3 popular cost) vs. The standard of $1,500 (a hundred gadgets of output X 5 fashionable kilos = 500 wellknown pounds x $three popular value).

Finance Interview Questions
Question 28. What Is The Production Volume Variance?

Answer :

The manufacturing volume variance is associated with a wellknown costing device used by some manufacturers. This variance shows the distinction among 1) the enterprise's budgeted amount of fixed production overhead costs, and 2) the quantity of the constant manufacturing overhead expenses that were assigned to (or absorbed by means of) the enterprise's manufacturing output.

To illustrate the manufacturing volume variance, allow's assume that a manufacturer had budgeted $three hundred,000 of fixed manufacturing overhead (supervisors' reimbursement, depreciation, and so forth.) for the imminent yr. During that length it predicted to have 30,000 machines hours of accurate output. Based on this plan the producer installed a fixed manufacturing overhead charge of $10 consistent with trendy device hour. If the company genuinely produces 29,000 popular machine hours of good output, the products could be assigned (or could have absorbed) $290,000 of the constant manufacturing overhead. This will motive an adverse production extent variance of $10,000 ($300,000 budgeted vs. $290,000 assigned; or 1,000 too few popular device hours of excellent output X $10 in step with general device hour).

If our instance had said that the producer virtually produced 32,000 popular system hours of right output, the products could have been assigned $320,000 of fixed manufacturing overhead fees compared to the budgeted amount of $300,000. This scenario could bring about a positive production quantity variance of $20,000 ($300,000 budgeted vs. $320,000 assigned; or 2,000 additional preferred system hours of desirable output X $10 in keeping with preferred system hour).

Question 29. Why Do Manufacturers Use Standard Costs?

Answer :

One cause for a producer to use fashionable charges is to plot carefully what its costs might be for the imminent budgeting yr and to then compare the actual charges with those deliberate charges. If the actual expenses are just like the standard charges (the deliberate expenses; what the expenses should be) the organisation is on course to reach the fee part of its earnings plan. If the real costs deviate from the standard charges, management is alerted by the variances which are suggested for substances, labor and manufacturing overhead. Hence standard prices permit a manufacturer to practice control via exception. That is, if the real expenses are what they ought to be, management action is not required. If the real fees are extra than the usual fees, management ought to take action or it will now not attain the planned income.

The wellknown cost variances direct management's interest to the location wherein the problems are going on. If the troubles cannot be solved without problems, control may need to explore exchange materials or approaches, try to boom promoting prices, etc. Again, without reacting to the variances the agency's deliberate profit for the yr will now not be met.

Question 30. Is Standard Costing Gaap?

Answer :

Standard costing became advanced to help a producer plan and manipulate its operations. Generally prevalent accounting standards or GAAP require that a manufacturer's financial statements follow the cost principle. This way that the inventories, the price of goods offered, and the ensuing net profits have to mirror the producer's actual costs.

Standard costing will meet the GAAP necessities if the variances between the standard expenses and the real expenses are nicely prorated to the inventories and to the cost of products offered prior to issuing the economic statements.

Question 31. What Is Standard Costing?

Answer :

Standard costing is an accounting approach that some manufacturers use to identify the differences or variances between 1) the actual charges of the goods that were produced, and a pair of) the fees that must have occurred for the ones items. The expenses that have to have came about for the actual appropriate output are known as popular prices.

Standard costing is probable included with a manufacturer's budgets (profit plan, grasp price range) for an accounting year and involve the product charges: direct substances, direct labor, and manufacturing overhead. With widespread costing, the money owed for inventories and the value of products offered include the usual charges of the inputs that ought to have been used to make the actual accurate output.

If the organisation had incurred greater than the standard costs for the direct substances, direct exertions, and manufacturing overhead, the employer will now not meet its projected internet earnings. In different words, the variances will direct management's interest to the production inefficiencies or higher input charges. In turn, management can take motion to accurate the issues or are seeking for higher selling charges.

Since the external economic statements should reflect the ancient price precept, the usual costs in the inventories and the price of goods bought will need to be adjusted for the variances. Since most of the goods synthetic will were offered, most of the variances will be mentioned at the profits declaration as a part of the price of goods sold.

Question 32. How Is The Material Usage Variance Account Reported On The Financial Statements?

Answer :

The fabric utilization variance in a standard costing system consequences from using extra or much less than the standard amount of direct substances distinct for the actual goods produced. If the actual amount of the enter direct materials is extra than the standard amount allowed for the coolest output, the variance is negative and the Material Usage Variance account will have a debit balance . If the actual amount of the enter direct materials is much less than the standard quantity allowed for the good output, the variance is favorable and a credit might be entered in the Materials Usage Variance account.

When preparing the economic statements, a debit balance within the Materials Usage Variance account (this means that an damaging variance) will should be brought to the same old fee of the products. If the usual costs associated with the variance are in the products which have been offered, the debit stability within the variance account may be added to the Cost of Goods Sold, an profits assertion price. (This is cheap, due to the fact the same old value is too low compared to the real price of the substances.) If the output related to the variances is completely in completed items inventory, then the debit balance inside the variance account might be introduced to the completed items stock amount mentioned on the balance sheet. Again, this is necessary due to the fact the same old fee of the completed goods inventory is simply too low. If the goods are in paintings in method, finished goods inventory, and price of goods bought, you'll assign the variance to all 3 classes primarily based on the proportions related to the variance amounts. Accountants confer with this as prorating the variances. If the variance quantity is insignificant, accountants will genuinely assign those small variances to the cost of products bought. This is affordable if most of the products that were produced were offered. Generally, inventories are small in relation to the portions produced.

Credit balances in the variance bills constitute favorable variances and will reduce the standard expenses which are said as debit balances in inventory on the balance sheet or as fee of goods bought expense on the earnings announcement. The favorable variances could be prorated as discussed above or clearly credited to value of products bought when the variances are not massive or cloth in quantity.

Question 33. What Do Overabsorbed And Underabsorbed Mean?

Answer :

In price accounting, production overhead fees are frequently assigned to products via using a predetermined overhead fee. The predetermined charge is probable based on an annual production overhead price range divided by some hobby which includes the predicted variety of machine hours. Instead of pronouncing that the producing overhead is assigned, we would say it's miles allotted, applied or apportioned to the goods manufactured during the duration. We could also say that the products have absorbed the overhead.

If the quantity of overhead assigned to the goods manufactured is more than the quantity of overhead simply incurred, the products have overabsorbed the overhead charges. If the amount of overhead assigned to the goods is much less than the quantity of overhead really incurred, the goods have underabsorbed the overhead expenses.

The motive of the overabsorption or underabsorption will be some combination of one) the amount of products synthetic, and a couple of) the real overhead costs incurred.

Budgetary Control Interview Questions
Question 34. What Causes An Unfavorable Fixed Overhead Budget Variance?

Answer :

An damaging constant overhead price range variance results whilst the real amount spent on constant production overhead charges exceeds the budgeted quantity. The constant overhead finances variance is likewise referred to as the fixed overhead spending variance.

Fixed overhead prices are the oblique production prices that aren't predicted to exchange while the extent of hobby changes. Some examples of fixed manufacturing overhead encompass the depreciation, assets tax and coverage of the manufacturing unit homes and system, and the salaries of the manufacturing supervisors and executives.

Since the fixed production overhead expenses must stay the identical within reasonable degrees of hobby, the amount of the constant overhead finances variance ought to be fairly small.

Question 35. What Does An Unfavorable Volume Variance Indicate?

Answer :

An negative volume variance indicates that the amount of constant manufacturing overhead expenses applied (or assigned) to the manufacturer's output was less than the budgeted or planned amount of fixed production overhead costs for the equal term. The damaging quantity variance indicates that the period's output turned into much less than the deliberate output.

The quantity variance is likewise known as the manufacturing quantity variance, the capacity variance, or the idle ability variance.

Question 36. What Is A Bom?

Answer :

BOM is the acronym for invoice of materials. A BOM is a listing of the portions of every of the materials utilized in manufacturing a product.

Industrial producers are probably to have an large variety of BOMs. Each of the BOMs may be a completely designated listing of all the portions of each fabric used in the numerous steps of manufacturing each element or product.

To visualize a BOM, think of a bakery that produces best pies. Each pie's BOM will listing the components within the pie's recipe. Each BOM will listing the variety of kilos (or different unit of degree) of the specific fruit, the amount of a particular sugar (or different sweetener), the quantity and kind of cinnamon, the quantity of nutmeg, the kind of crust. There can also be a BOM for the pie crust. The pie crust BOM will specify the quantity and form of flour, the amount and sort of butter (or oil), the quantity of salt, and many others.

Marginal cost Interview Questions
Question 37. What Is A Burden Rate In Inventory?

Answer :

I assume that the load charge in stock refers to a manufacturer's indirect manufacturing charges, which might be additionally referred to as factory overhead, oblique manufacturing charges, and burden. In the U.S., a manufactured product's value consists of direct materials, direct labor, and production overhead. Since manufacturing overhead is an oblique value, it's also assigned or allocated through an overhead rate or burden fee. Two examples of an overhead or burden rate are 1) a percent of direct exertions, and 2) an hourly value fee assigned on the premise of gadget hours.

A product's production cost, inclusive of direct materials, direct labor and manufacturing overhead, is used to file the value of products bought and additionally the fee of devices in stock. Therefore, in case you take a look at the element of a product's stock value, you may see the producing overhead being assigned or implemented to the unit through a burden price.

Question 38. What Are The Advantages Of Departmentalizing Manufacturing Overhead Costs?

Answer :

The departmentalizing of manufacturing overhead charges permits for higher planning and control if the top of every department is held chargeable for the prices and productivity of his or her branch.

The departmentalizing of manufacturing overhead expenses also permits for the computation and alertness of numerous departmental overhead value prices rather of having a single, plant-extensive overhead rate. This is important while there are an expansion of merchandise and some require many operations in a department with excessive overhead quotes, at the same time as different products require only a few operations within the excessive cost department. There can also be merchandise which require many hours of processing, however they arise in low price departments.  For example, the meeting and packing departments of a manufacturer are in all likelihood to have very low overhead cost fees. On the other hand, the fabricating and milling departments will likely have much higher overhead fee prices.

Question 39. Is A Favorable Variance Always An Indicator Of Efficiency In Operation?

Answer :

In a widespread costing system, a few favorable variances are not signs of performance in operations. For instance, the materials rate variance, the exertions fee variance, the producing overhead spending and price range variances, and the production volume variance are generally no longer related to the performance of the operations.

On the other hand, the materials usage variance, the hard work efficiency variance, and the variable manufacturing efficiency variance are indicators of running performance. However, it is feasible that a number of those variances may want to end result from standards that had been not sensible. For instance, if it realistically takes 2.Four hours to provide a unit of output, but the general is set for two.Five hours, there should be a positive variance of zero.1 hour. This zero.1 hour variance consequences from the unrealistic standard, in place of operational performance.

Question forty. Is There A Relationship Between Direct Materials Variances And Direct Labor Variances?

Answer :

There can be a connection among the direct materials variances and the direct hard work variances. In reality, there can be a courting between a number of the variances.

Let's anticipate that a decrease costing material is bought with a view to gain a positive materials price variance. If the substances have a few bad attributes, it is possible that an damaging substances utilization variance may want to result. If the substances' attributes cause additional exertions hours, then an destructive direct hard work performance variance will result. If the materials required more skilled labor, it's far possible that a labor fee variance can even occur.

The above example can also make bigger to the overhead variances. If more strength and supplies needed to be used because of the materials' attributes, there may be an negative variable overhead performance variance. If the volume of output is curtailed by way of the materials' attributes, there could probable be a hard and fast overhead quantity variance.

Material fee Interview Questions
Question 41. Do Variance Accounts Have An Impact On Financial Statements? Or Are They For Performance Evaluation Only?

Answer :

Since the monetary statements have to replicate the fee precept, each the usual costs and the variances need to be included in the monetary statements.

For instance, if a right away cloth has a popular cost of $four hundred however the organisation paid $422, the financial assertion need to document $422 (the usual cost of $four hundred plus the price variance of $22).

How the variances are stated at the economic statements is mentioned within the ultimate part of our Explanation of Standard Costing.

Question forty two. In Least Squares Regression, What Do Y And A Represent?

Answer :

Here are the meanings of the additives or symbols used in the least squares equation of y = a + bx:

y is the based variable, along with the predicted or expected general fee of strength for the duration of a month. The quantity of y is dependent upon the amounts of a and bx.

A is the envisioned overall quantity of fixed power prices all through the month. It is the fee of y, while x is zero. If the overall value line intersects the y-axis at $1,000 then it's far assumed that the total constant prices for a month are $1,000.

B is the predicted variable fee in keeping with unit of x. It determines the slope of the total fee line. If b is $five, which means that the variable value part of strength is predicted to be $five for every unit of x.

X is the impartial variable. For example, x could constitute the acknowledged variety of machine hours used within the month.

Bx is the overall variable fee of strength. If the agency's energy price is envisioned to be $five consistent with unit of x, and x is 4,000 system hours, then the whole variable price of energy for the month is anticipated to be $20,000.

In our instance the total envisioned value of energy (y) in a month when x is four,000 gadget hours could be $21,000.

Activity Based Costing Interview Questions
Question forty three. Why Does A Cost System Developed For Inventory Valuation Distort Product Cost Information?

Answer :

The price gadget for stock valuation may additionally have been evolved to provide a reasonable general value of stock and a reasonable general price of products offered so as to have fairly accurate monetary statements. If a agency has small stock amounts and sizable sales, a eas