1. Costings Flashcards
What are the three types of management activity
Planning: defining objectives and assessing requirements eg. budgeting and forecasting
Control: evaluating performance and execution of plan eg. feedback and feedforward
Decision Management: answering questions for managers
How does R. Anthony split up management activity
- Strategic
-Tactical
- Operational
Define cost object
Anything for which cost data is required
A product, service, centre or activity for which costs are ascertained
Define Cost card
A document which groups the costs of a product/service in order to arrive at total cost
Define Cost unit
A unit of product/service to which costs can be attachedD
Define Direct costs and Indirect costs
Costs that can be directly linked with unit of production or service
Indirect: costs that cannot be identitified with a unit of production
Define production costs
Total manufacturing costs
Explain the structure of a cost card
Direct materials
Direct labour
Direct expenses
= Prime cost
Production overheads
= Production cost
Non production overheads
Selling and distribution
Adminstration
Finance
= Total cost
Define Cost Centres
Location, function or item of equipment in respect of which costs may be ascertained and related to costs units for control purposes
Collecting point for costs
Define production cost centres and service cost centres
Production cost centres: factory cost centres through which units of production flow
Service cost centres: support or service the production cost centres
How can costs be classified
By Function or by Nature
What are the three major cost elements
Materials
Labour
Expenses
Define prime cost
The total of the direct cost
Prime Cost = Direct materials + Direct Labour + Direct expenses
What are the main cost behaviours
Fixed costs: total costs remain same regardless of output.
Variable: Total costs that increase as output increases
Stepped costs: Costs that remain same up to a certain level of activity and then jump
Semi-variable costs/mixed costs: costs that contain elements for both fixed and variable costs
How are overheads calculated
Indirect materials + indirect labour + indirect expenses
Finish the sentence: over the long term all costs are what?
variable
How is variable cost expressed
Total variable cost = variable cost per unit x number of units
How do you work out semi variable cost
Total semi variable cost = fxed elemetn + (Variable cost per unit x number of units)
Equation for high low method to work out variable cost
Variable cost per unit = High cost - low cost
/
High output - low output
What are the features of service industry which make costing difficult
S: simultaneous production and consumption
H: Heterogeneity of services
I: Intangibility of services
P: Perishable nature of services
What is meant by job costing
Customised or unique output of product or service
What is meant by process costing systems
Multiple items are produced simultaenously and are not separately identifiable until split off point at end of production process
so average cost per unit is used
eg. oil
What are the issues surrounding digital cost objects
- High fixed costs; research and development of technology
- Low variable costs; cost of providing digital cost are tiny
- Ongoing development costs; rapid evolution of software
- Security and compliance costs; data security, regulation and investment
- Evolving revenue streams: subscription based revenue structure due to cloud based
What is the CGMA Cost transformation model
- Designed to help bsuiness achiebe and maintain cost competitiveness
What are the features of the CGMA Cost transformation model
- Engendering cost- concious culture
- Managing risks inherent in driving cost competitiveness
- Connecting products with profitability
- Generate maximum value through new products
- Incorporate sustainability to optimise profits
- Understand cost drivers
Define period cost
A cost that relates to a time period which is deducted as expenses for the period and is not included in the inventory valuation.
A period cost is charged against the sales for the period. It is not carried forward in inventory to a future period.
What are features of fixed cost
- Constant in total when production volume changes
- Decreasing in cost per unit of output
What is meant by relevant costing method
Minimum price of a job which covers all relevant costs
