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1. Costings Flashcards

1
Q

What are the three types of management activity

A

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

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2
Q

How does R. Anthony split up management activity

A
  • Strategic

-Tactical

  • Operational
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3
Q

Define cost object

A

Anything for which cost data is required

A product, service, centre or activity for which costs are ascertained

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4
Q

Define Cost card

A

A document which groups the costs of a product/service in order to arrive at total cost

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5
Q

Define Cost unit

A

A unit of product/service to which costs can be attachedD

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6
Q

Define Direct costs and Indirect costs

A

Costs that can be directly linked with unit of production or service

Indirect: costs that cannot be identitified with a unit of production

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7
Q

Define production costs

A

Total manufacturing costs

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8
Q

Explain the structure of a cost card

A

Direct materials
Direct labour
Direct expenses
= Prime cost
Production overheads
= Production cost
Non production overheads
Selling and distribution
Adminstration
Finance
= Total cost

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9
Q

Define Cost Centres

A

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

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10
Q

Define production cost centres and service cost centres

A

Production cost centres: factory cost centres through which units of production flow

Service cost centres: support or service the production cost centres

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11
Q

How can costs be classified

A

By Function or by Nature

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12
Q

What are the three major cost elements

A

Materials
Labour
Expenses

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13
Q

Define prime cost

A

The total of the direct cost

Prime Cost = Direct materials + Direct Labour + Direct expenses

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14
Q

What are the main cost behaviours

A

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

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14
Q

How are overheads calculated

A

Indirect materials + indirect labour + indirect expenses

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15
Q

Finish the sentence: over the long term all costs are what?

A

variable

16
Q

How is variable cost expressed

A

Total variable cost = variable cost per unit x number of units

17
Q

How do you work out semi variable cost

A

Total semi variable cost = fxed elemetn + (Variable cost per unit x number of units)

18
Q

Equation for high low method to work out variable cost

A

Variable cost per unit = High cost - low cost
/
High output - low output

19
Q

What are the features of service industry which make costing difficult

A

S: simultaneous production and consumption

H: Heterogeneity of services

I: Intangibility of services

P: Perishable nature of services

20
Q

What is meant by job costing

A

Customised or unique output of product or service

21
Q

What is meant by process costing systems

A

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

22
Q

What are the issues surrounding digital cost objects

A
  • 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
23
Q

What is the CGMA Cost transformation model

A
  • Designed to help bsuiness achiebe and maintain cost competitiveness
24
Q

What are the features of the CGMA Cost transformation model

A
  1. Engendering cost- concious culture
  2. Managing risks inherent in driving cost competitiveness
  3. Connecting products with profitability
  4. Generate maximum value through new products
  5. Incorporate sustainability to optimise profits
  6. Understand cost drivers
25
Q

Define period cost

A

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.

26
Q

What are features of fixed cost

A
  • Constant in total when production volume changes
  • Decreasing in cost per unit of output
27
Q

What is meant by relevant costing method

A

Minimum price of a job which covers all relevant costs

P (12 decks)

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