02 - Cost of Production Determination

Question 1

methods to determine the cost of production

Answer 1

direct method

indirect method

mixed method

Question 2

direct method

Answer 2

applicable to companies w/ diversified + non-continuous production

each product batch/order/product is distinguishable

worksheet allows for determination + control of costs
- overheads allocated on quotas

Question 3

indirect method

Answer 3

applicable to companies w/ continuous + homogeneous production

RM + transformation costs are accumulated

costs are then shared by products periodically according to units used

relates to cost centres

Question 4

mixed method

Answer 4

applicable to companies w/ continuous production up to a certain point and then individualizes the production costs

Question 5

average unit cost

Answer 5

simple + easy

only applicable to products w/ same p. u.
doesn’t consider market value or specific costs
ignores different consumptions of joint costs

Question 6

WAC

Answer 6

consideres technical differences of products

subjective attribution of weights
ignores specific costs
ignores different consumptions of joint costs

Question 7

R. SVSP

Answer 7

applicable to products w/ different p. u.
considers market value + specific costs
objective criteria

Question 8

variation of activity levels - impact on costs

Answer 8

FCt- constant w/in a certain level
- FCu vary in inverse proportion to activity level

VCt - vary in proportion to activity level
- VCu constant (independently of activity)