The business world is highly competitive, forcing organizations to do everything they can to keep up. One of the areas that these organizations take seriously is staffing. Everyone wants to have an effective and all-rounded set of employees.
As a job applicant, you need more than your academic credentials to land a position. This article looks at some of the interview questions to expect in a cost accounting interview room, which will help you prepare well and convince the interviewers that you are the perfect fit.
I am an experienced accountant, having spent twenty years in this field. I have gained lots of insight and knowledge, which I can apply here to better your organization. This job’s description also fits my expertise, which is an added advantage.
Costing can be defined as the process of ascertaining costs. It, therefore, refers to the technique of ascertaining costs. It encompasses all the principles applied in determining the cost of products and services. Different types of costing exist depending on the industry. These are historical, absorption, marginal, and standard costing.
Cost accounting is the application of accounting and costing principles to determine costs. It also refers to analyzing savings or expenses and comparing them with previous expenses or standards. It uses different costing methods and techniques to classify, record, and appropriately allocate expenses to determine the price of products and services and their relations to sales values. It aims at determining profitability.
Cost accounting plays three major roles. First, it is used to determine the cost of a product through different costing methods. Its second use is to determine the selling price of a given product, which helps the business recover the production cost and earn some profit. Lastly, it is used to analyze and classify the cost of production. This helps the business know what went to waste and how it can improve as time goes by.
Cost accounting plays a huge role in making revenue decisions, such as pricing new products and the increase or reduction of sale prices. It also comes in handy in making short-term and long-term mix decisions.
The data obtained can also combine different factors used in the business model for maximum profitability.
Through cost accounting, the business obtains lots of data used to determine whether a venture is profitable or not. They can either choose to drop it or improve on key areas for maximum profitability. It also helps businesses minimize wastages and thus widen the profit margin.
Lastly, this job reveals the cost of all the possible alternatives, allowing the business to settle on one that seems advantageous.
We cannot ignore that cost accounting is not a full-proof system, given that it has developed over time thanks to different theories and practices. It has its faults, just like any other branch of accounting. The main one is a lack of uniformity as it does not conform to any uniform procedure.
Its scope of application is also limited as it is mostly suitable for large businesses. Lastly, several conventions and practices of cost valuation exist, and therefore its determinations are mostly estimates.
Such organizations should develop systems that will satisfy the needs of their different concerns. They should also consider several principles as follows. First, there should be little disturbance of the current organization of the unit. The system should also be introduced gradually and be easy to operate. Lastly, the staff should be involved, given that the success of any system is pegged on them.
This begins in the installation stage. I will first ensure that my organization installs a system that blends in with its processes. Afterward, I will ensure that all the reports and analyses from the system have relevant information and are produced promptly. I will also ensure that the system produces information in the relevant form and of high levels of accuracy.
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What normally comes into many people’s minds whenever one mentions a cost center is a place or machine. However, this can be a location, person, or equipment that ascertains costs and uses the data for cost control.
The business is usually divided into relevant parts where costs can be conveniently charged. These are cumulatively known as cost centers. When coming up with a cost center, the business may consider how work is divided in the organization, the availability of information, communication aids, and the relevant management policies.
In my experience, a cost center has two main utilities. First, it rolls out responsibilities. The manager of the cost center controls all the costs in the particular center. He is always expected to account for any cost escalation or wastages.
Lastly, the cost centers assemble all the costs to establish a base or recovery for the cost center and organization.
In all the organizations I have worked in, I have come to know of three types of cost centers. The first is the personal cost center, a person or a team. The second is the production cost centers, responsible for production work. All direct production costs are normally charged to such centers. The last is the service cost centers, which offer services to production centers. These deal with indirect costs and can either be plant maintenance, administration, personnel service, and material service centers.
It is a quantitative unit of a product or service which guides the estimation of costs. These can either be units of production such as kilowatt-hours, tons, units of service, gallons, consultation hours, and in some cases, patent rights.
To define the concept of cost accounting, we must first understand what cost is. It is the total value of resources used in producing a good or service, expressed in terms of money or monetary units.
It is the monetary measurement of the cash used, property transferred, issued stock, services, or liability incurred to produce given goods and services. Unless used by an objective or phrase, this term can mean many things.
This defi8nite meaning of cost is used in computing, measuring, and analysis, which helps achieve the three main objectives of cost accounting: determination, analysis, and control of costs.
A cost sheet is a detailed statement that captures information about costs and further ascertains the total cost of a manufactured product within a given duration. Some of its advantages include equipping the management with sufficient information for control, helping the management come up with selling prices, and determining the total cost and cost per unit for a given time.
It is the maintenance of an ever-available supply of different factors of production, such as raw materials, purchased parts, and different manufacturing goods. It places functional responsibilities on those involved, such as acquiring materials for purchase in fixed quantities and at the right time.
They also receive, store and protect the materials before releasing them to the different production units upon request. Such parties must also maintain proper records, which aids in financial reporting and decision-making.
The two main labor costs are preventive and replacement. Preventive costs help keep the labor turnover low. They refer to the benefits given to the employees to keep them satisfied and in the organization. These include the costs of safety measures, welfare amenities, retirement benefits, scientific training, selection, job evaluation, and merit training.
Replacement costs are incurred whenever labor is replaced. These include loss owing to machine failure and inefficiency, cost of additional supervision, increase in overhead costs, and cost of selection, which may include advertisement or interviewing of candidates.
Batch costing is a special type of cost. It is a specific order costing where similar articles are produced in batches for sale or internal usage. It normally occurs when production involves less repeated work, and manufacturing is done in batches, with a definite number of articles.
This type of costing is normally used in the bakery, toy, and shoe industries. All the items in the batch maintain the same identity through one or more production stages. In this costing, each batch’s cost is separately arrived at.
All the issued materials and wages are allocated to the batch. Time tickets are used to calculate wages as they show the quantity of time given to each batch order number by workers. Overhead costs are then absorbed using the best absorption basis. Lastly, the cost per unit is calculated by dividing the total cost of the batch by its quantity.
Also known as terminal costing, contract costing is similar to job costing. However, it applies to businesses in the building and construction industry. It is done on a frequent site-based work that runs for a relatively longer duration and is undertaken on a customer’s special request.
There are several differences between these two. However, the main one is that regular costing can be done on several jobs simultaneously, which may not be the case for contracts. In contract costing, most expenses are directly charged to a contract account which is impossible in job costing. Contract costing is also quite simple since control, allocation, and analysis are made easier.
It is an operation costing method applied where production is done in a series of processes. It deals with standardized goods. It is applicable in several industries such as oil refining, drug manufacture, food processing, paint manufacture, and textiles, to mention a few.
Process costing has several features. First, its cost centers are clearly defined and all the costs are accumulated there. It also involves the maintenance of accurate unit records and the incurred costs in each process. The loss in a process or department is borne by the completed units, increasing the average cost.
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To prepare a cost sheet, the costs are grouped into three broad classifications- the finished/standing charges, maintenance charges, and operation/ running charges. Depreciations in tools of production can either be treated as a fixed or semi-variable cost. However, this boils down to how the business charges depreciation.
I do not know about the other applicants and cannot, therefore, talk about them. However, I believe that I have all it takes to achieve success in this position. I am passionate about accounting, having been a lover of Mathematics since childhood. I have also gained lots of experience over the years, which I can use to better this organization.
These are some of the questions that you should expect in a cost accounting interview. I hope that our answers will help you come up with unique responses.
