Question

Question 1

1. Differentiate between contract costing and service costing. Provide your answer in tabular form with three differences.   (6 marks)
2. List five (5) industries which are most likely to apply contract costing in their operations.

(10 marks)

3. In a tabular form, provide two (2) similarities and two (2) differences each between Activity Based Costing (ABC) method and the Traditional method of charging overheads.                                    (8 marks)
4. How different in management accounting from cost accounting? Provide a brief commentary in two paragraphs.    (4 marks)

TOTAL MARKS (28 MARKS)

Answer 1

Differentiate between contract costing and service costing. Provide your answer in tabular form with three differences.

Basis Of Difference	Contract Costing	Service Costing
Meaning	Contact Costing is one form of application of the principles of job order costing. In contract cosrting each contract is treated as cost unit and costs are ascertained separately for each contract.	Service Costing is a method of ascertaining cost of providing a service.It is also known as Operation Costing.
Expense Classification	In contract costing, most of the expenses are of direct nature, overheads form only a small percentage of total expenditure.	The expenses, under service costing, are divided into fixed and variable cost. Such a classification is important to ascertain the cost of services and unit cost of service
Industry	It is syyuitable for business concerned with building, engineering projects, structural orcontruction contracts.	Service Costing is extensively used in transport industries, hotel industries, electricity company etc.

List five (5) industries which are most likely to apply contract costing in their operations.

This costing method is adopted by the industries :

1) Building

2)Engineering Projects

3) Structural Contracts

4) Construction Contracts

5)Ship Building

In a tabular form, provide two (2) similarities and two (2) differences each between Activity Based Costing (ABC) method and the Traditional method of charging overheads.      

Differences

Activity Based Costing	Traditional Method
Overheads are first associated with activities or grouped into cost pools.	Overheads are first associated with department cost centres.
In manufacturing cost hierarchy: Unit level. batch level, product level, and facility level activities are identified	Two types of activities are identified namely : Unit Level activities, Facility Level Activties

Similarities

1. Both the methods provide same data.
2. ABC and traditional costing system second and final stage consistes of tracing costs to the products.

How different in management accounting from cost accounting? Provide a brief commentary in two paragraphs.

Cost Accounting and management accounting both are internal to an organization,however, there are some difference between the two. Cost accounting is related more with ascertaining, allocation, distribution, and accounting aspects ofcosts. Ont eh other hand, management accounting is concerned with impact and effect aspects of costs.

The data of cost accounting is helpful in determining which tools and techniques of management accounting can be applied to make it even more purposful and mangement oriented. . However, the management accounting data is derived both from cost accounts as well as financial accounts.