CBSE Class 12 – Cost Accounting Question Paper 2023

Section A

1. Answer any 4 questions out of the given 6 questions on employability
skills.

(i) Define Obsessive Compulsive Personality Disorder.

Answer:
Obsessive-Compulsive Personality Disorder (OCPD) is a personality disorder characterized by a preoccupation with orderliness, perfectionism, and control. People with OCPD often focus on rules, lists, details, and schedules to the extent that they might become rigid and inflexible. This condition can interfere with their relationships and day-to-day functioning, as they prioritize productivity and control over flexibility and creativity.

(ii) What is meant by Paranoid?

Answer:
Paranoid refers to a mental condition where an individual exhibits irrational suspicion and mistrust of others. People who are paranoid tend to believe that others are plotting against them or trying to harm them, even without any evidence. This can lead to excessive vigilance, isolation, and difficulty trusting others.

(iii) A cost accountant wants to paste the copy of the cell contents. Which shortcut key should he use?

Answer:
The correct shortcut key is: (d) Ctrl + V
Ctrl + V is the shortcut for pasting content that has been copied or cut.

(iv) Another term that is used for a Spreadsheet Software is:

Answer:
(b) MS Excel
MS Excel is the popular spreadsheet software from Microsoft used for data organization, calculation, and analysis.

(v) ___________ is the reward for an entrepreneur for bearing the risk.

Answer:
Profit
Profit is the reward an entrepreneur receives for bearing the risk and uncertainty involved in starting and running a business.

(vi) Shortage of capital is a huge barrier to __________.

Answer:
(b) Entrepreneurship
A shortage of capital can be a significant barrier to entrepreneurship, as it limits the ability to start and grow a business.

2. Answer any 5 out of the given 7 questions.

(i) Define Factory Cost.

Answer:
Factory cost refers to the total cost incurred in the production of goods within the factory. It includes direct materials, direct labor, and factory overheads (indirect materials, indirect labor, and other factory costs).

(ii) Output costing is also called __________.

Answer:
(b) Single costing
Output costing is often referred to as single costing, which is typically used in industries that produce a single product.

(iii) Write the formula to compute Prime Cost.

Answer:
Prime Cost = Direct Materials + Direct Labor
Prime cost includes the direct costs that are directly associated with the manufacturing of a product.

(iv) Office M salary comes under __________ overheads.

Answer:
Administrative overheads
Salaries of office staff, including Office M, come under administrative overheads, which are indirect costs related to the management and administration of the business.

(v) The form of work-in-progress is:

Answer:
(d) Ready to be worked upon for further processing
Work-in-progress refers to items that are in the middle of the production process and are not yet finished.

(vi) ___________ cost sheet considers the cost value that has actually been incurred.

Answer:
Actual cost sheet
An actual cost sheet records the actual costs that have been incurred during the production process.

(vii) Engineering and Shipbuilding industries use:

Answer:
(a) Job costing
Industries like engineering and shipbuilding typically use job costing, as each project or job is unique and requires specific tracking of costs.

3. Answer any 6 out of the given 7 questions.

(i) The production and planning department issues ______ to provide up-to-date information regarding the status of each job completion at each operation.

Answer:
Job Progress Report
The production and planning department issues a job progress report to track the status of each job.

(ii) Who sends the progress advice to the production and planning department?

Answer:
(b) Foreman
The foreman sends progress advice to the production and planning department, providing updates on the status of job completion.

(iii) Labour time which is directly related with a particular job/product is called:

Answer:
(c) Direct labour
Direct labour refers to the labour costs directly associated with the production of a specific job or product.

(iv) Write the formula for “Economic Batch Quantity”.

Answer:
Economic Batch Quantity (EBQ) = √(2DS / H)
Where:

D = Demand or units required per period
S = Setup cost per batch
H = Holding cost per unit per period
This formula calculates the optimal batch size to minimize production costs.

(v) Contract is a special form of job costing which is also known as:

Answer:
(d) Contract costing
Contract costing is used to track costs associated with long-term projects or contracts, making it a special form of job costing.

(vi) The work on the contract is carried out at the ______ of contract.

Answer:
Site
Work on the contract is typically carried out at the site of the contract, where the actual project or job is being completed.

(vii) Overheads are apportioned on suitable basis and ______ to the contract account.

Answer:
(b) debited
Overheads are apportioned based on a suitable method and debited to the contract account.

4. Answer any 5 out of the given 6 questions.

(i) Which account is debited after completion of contract?

Answer:
Contract Account
After completion of the contract, the contract account is debited to record the total expenses, profits, and losses related to the contract.

(ii) In case of incomplete contracts, profits should be considered in respect of __________ only.

Answer:
(b) work certified
In the case of incomplete contracts, profits are considered only in respect of the work certified, as this work is considered as completed and ready for valuation.

(iii) In process costing, all direct and indirect costs related to a particular process are _________ to process account.

Answer:
(a) debited
In process costing, all direct and indirect costs incurred in a particular process are debited to the process account.

(iv) Name two industries that use process costing.

Answer:

Oil Refining Industry
Cement Industry
These industries often produce large quantities of similar products, making process costing the most suitable method for cost allocation.

(v) After the final process, goods are turned into ___________.

Answer:
(b) Finished goods
After the final process, goods are considered finished and ready for sale, so they are classified as finished goods.

(vi) If scrap of normal loss is 200 units, with a sale value of ₹150 per unit, compute the amount of scrap.

Answer:
Amount of Scrap = 200 units × ₹150 per unit = ₹30,000
The total value of the scrap from normal loss would be ₹30,000.

5. Answer any 5 out of the given 6 questions

(i) Define abnormal process loss.

Answer:
Abnormal process loss refers to the loss in a production process that is above the expected or normal loss. This type of loss is considered abnormal because it exceeds the normal or anticipated loss and usually requires special attention to minimize its occurrence.

(ii) Process costing is used in the business where the products are:
Answer:
(a) Homogeneous
Process costing is typically used in industries where products are homogeneous, meaning they are identical and produced in large quantities, such as in oil refining, chemicals, and cement production.

(iii) __________ services are rendered to customers at selling price.

Answer:
(b) External
External services are those offered to customers outside the organization, and they are usually charged at the selling price.

(iv) Educational institutions use __________ costing.

Answer:
Absorption costing
Educational institutions typically use absorption costing, which involves allocating all costs to the services or courses offered (such as tuition fees) and allocating both fixed and variable costs to the services.

(v) Which costing method applies in case of business having standardized services being offered to internal departments or external clients?

Answer:
Standard costing
Standard costing is used when standardized services are offered to internal departments or external clients, and it helps in measuring the difference between the expected and actual costs.

(vi) Services are always __________.

Answer:
(b) Intangible
Services are intangible, meaning they cannot be touched or physically possessed, unlike physical goods. They are experiences, actions, or performances that are offered to customers.

6. Answer any 5 out of the given 6 questions.

(i) Canteen business uses ___________.

Answer:
(c) Operating costing
Operating costing is used in services like canteen businesses, where the focus is on managing costs for the ongoing operations, such as meals served or services provided.

(ii) Notional Salaries are shown only in ___________.

Answer:
(a) Cost accounts
Notional salaries, which are theoretical costs (such as salaries not actually paid but accounted for in costing), are shown in the cost accounts to allocate costs appropriately.

(iii) Overheads are recorded at __________ rate in cost accounting, while they are recorded at ___________ rate in financial accounting.

Answer:
(a) predetermined, actual
In cost accounting, overheads are recorded using predetermined rates (estimated at the beginning of the period), while in financial accounting, actual overheads (real expenses incurred) are recorded.

(iv) Dividend received is:

Answer:
(c) Financial income
Dividend received is considered a financial income because it represents earnings from investments, not directly related to the core operations of the business.

(v) Notional loss decreases the ___________.

Answer:
(a) Cost profit
A notional loss decreases the cost profit, as it’s an expense that reduces the calculated profits within cost accounting, though it may not reflect actual cash outflows.

(vi) Define Reconciliation Statement.

Answer:
A Reconciliation Statement is a statement used to reconcile the difference between cost accounts and financial accounts. It adjusts the profit or loss shown in the cost accounts to match with the profit or loss in the financial accounts, by accounting for differences such as notional costs, overheads, and other accounting treatments.

Section B

Answer any 3 questions out of the given 5 questions on Employability skills.
Answer each question in 20 30 words.

7. How does self-motivation play a vital role to improve efficiency and productivity? Give any two reasons.

Improves Focus: Self-motivation helps individuals stay focused on their tasks, leading to better quality of work and efficient use of time.
Increases Commitment: Motivated individuals are more committed to achieving their goals, leading to higher productivity and consistent work performance.

8. What is meant by ‘Schizoid’?

Answer:
Schizoid refers to a personality disorder characterized by a lack of interest in social relationships, a tendency toward solitary activities, and emotional coldness. Individuals with this condition may struggle with forming close personal connections.

9. State two advantages of presentation software.

Enhances Visual Appeal: Presentation software allows the use of images, graphs, and animations, making information more engaging and easier to understand.
Organized Information: It helps structure and present ideas in a clear, logical format, improving audience comprehension.

10. List two qualities of a successful entrepreneur and explain any one in brief.

Visionary Thinking: Successful entrepreneurs can foresee opportunities and anticipate challenges.
Risk-taking Ability: Entrepreneurs must be willing to take calculated risks to expand and innovate.
Explanation: Risk-taking is essential for growth. Entrepreneurs need to step out of their comfort zones to seize new opportunities that can lead to business success.

11. Explain the term “Feasibility Study” by an entrepreneur.

Answer:
A feasibility study is a thorough analysis conducted by an entrepreneur to assess the practicality and potential success of a business idea or project. It evaluates market conditions, financial costs, resources required, and overall viability before proceeding.

12. If prime cost is ₹ 40,000 and selling and distribution overheads are ₹ 12,000, office overheads are ₹ 10,000, and selling and distribution overheads are ₹ 9,000, calculate the factory cost.

Answer:
Formula:
Factory Cost = Prime Cost + Factory Overheads
Factory Cost = ₹ 40,000 + ₹ 12,000
Factory Cost = ₹ 52,000

(Note: Selling and distribution overheads and office overheads are not included in the calculation of factory cost.)

13. Who prepares bills of material and why?

Answer:
The production department prepares the bills of material (BOM). It is prepared to specify the raw materials, parts, and components required for the manufacturing process, ensuring accurate planning and inventory control.

14. After the completion of a job, which report is prepared and why?

Answer:
After job completion, a Job Completion Report is prepared. This report provides a detailed summary of the job, including costs incurred, time spent, and materials used, helping in assessing the job’s profitability and performance.

15. Write the difference between process costing and job costing on the basis of ‘cost unit’ and ‘nature’.

Cost Unit:
- Process Costing: The cost unit is the process or the batch of products.
- Job Costing: The cost unit is the individual job or order.
Nature:
- Process Costing: Suitable for industries where production is continuous and standardized (e.g., chemicals).
- Job Costing: Used in industries where production is customized and unique (e.g., construction, consulting).

16. Explain operating costing in brief.

Answer:
Operating costing is a method of costing used in service-based industries. It is used to calculate the cost of operations or services provided, like transportation, canteen, or utilities, where the services provided are standardized.

17. Explain ‘Economic Batch Quantity’ in case of contract accounting.

Answer:
Economic Batch Quantity (EBQ) refers to the optimal quantity of materials or units that should be produced or purchased to minimize both ordering and holding costs in a contract. It helps determine the most cost-effective production batch size.

18. In case of contract account, pass necessary journal entries for the following:

(a) Value of work certified: Journal Entry:

Debit: Work-in-Progress (Contract Account)
Credit: Work Certified (Contract Account)

(b) Amount of cash received: Journal Entry:

Debit: Cash/Bank
Credit: Amount Receivable (Contract Account)

19. State three reasons for difference between cost records and financial records.

Basis of Accounting: Cost records follow cost accounting principles, while financial records follow financial accounting principles.
Nature of Transactions: Cost records focus on direct and indirect costs, while financial records include all income, expenses, and financial transactions.
Purpose: Cost records are used for internal decision-making and cost control, while financial records are used for external reporting and compliance.

Answer any 3 out of the given 5 questions in 50 80 words each.

20. What is meant by Scrap? How should it be treated while preparing a Cost Sheet?

Answer:
Scrap refers to the leftover materials, by-products, or waste that result from the production process, which may have some residual value.

Treatment in Cost Sheet:
Scrap is usually credited to the cost sheet as a reduction in the cost of production. The sale proceeds from scrap are deducted from the total cost of production, reducing the overall cost.

21. Rahul has given condensed record of transactions as on 31st March, 2022 relating to a special contract completed during the year:

Material bought from market ₹1,500
Material issued from store ₹500
Wages ₹400

Work overheads are 25% of prime cost.

Compute:

(a) Prime cost
(b) Work overheads

Solution:

(a) Prime Cost:

Prime Cost = Direct Material + Direct Wages
= ₹500 (Material issued from store) + ₹400 (Wages)
= ₹900

(b) Work Overheads:
Work overheads are 25% of Prime Cost.

Work Overheads = 25% of ₹900 = ₹225

22. Explain the steps of ‘Process Costing’.

Answer:
Steps of Process Costing:

Identify the processes: The first step is identifying the different processes involved in production, such as mixing, molding, or packaging.
Accumulate costs: Direct materials, direct labor, and overhead costs are accumulated for each process.
Allocate costs to processes: Allocate direct and indirect costs to the respective processes based on a reasonable method (e.g., machine hours, labor hours).
Calculate unit cost: Once all costs are allocated, the total cost of each process is divided by the number of units produced to calculate the unit cost.
Transfer costs to next process (if applicable): If the product undergoes multiple processes, the cost is transferred from one process to the next.
Record the cost of finished goods: At the end of the process, the cost of finished goods is recorded, and the process is complete.

23. How can composite units be worked out in two different ways?

Answer:

Unit of Production Method: In this method, different units of production are measured in terms of one common unit of measurement, such as kilograms or liters. These units are then converted into a single composite unit.
Weighted Average Method: In this method, different units are weighted based on their respective values or costs. The composite unit is calculated by adding the weighted averages of the units involved.

24. Explain the steps involved in preparation of Reconciliation Statement.

Answer:

Identify differences: Compare the profit shown in the cost accounts with the profit shown in the financial accounts. Identify the reasons for the differences, such as treatment of overheads, direct expenses, etc.
List adjustments: Adjust for the items like depreciation, notional losses, stock differences, etc., which may have been treated differently in both sets of accounts.
Calculate the difference: Add or subtract the adjustments to find the difference in profit between cost and financial accounts.
Prepare the Reconciliation Statement: Present the adjustments in a structured manner, showing the profit in the cost accounts and reconciling it with the profit in the financial accounts.