An Introduction To Cost Accounting

Question 1

What is cost accounting?

Answer 1

Also known as management accounting it provides information internally to help with decision making, planning and control.

Question 2

What is classed as a responsibility centre?

Answer 2

Cost centres
Profit centres
Investment centres

Question 3

How are costs charged?

Answer 3

Costs can be charged directly to cost units or specific areas of the business.

Question 4

What do profit centres analyse?

Answer 4

Profit Centres analyse costs and revenue to show profit

Question 5

What is the profit formula?

Answer 5

Revenue - Costs

Question 6

What does the investment centre consider?

Answer 6

The investment centres consider profit in relation to the amount of money invested in the centre

Question 7

How can costs be classified?

Answer 7

Nature
Function
Behaviour

Depends on the purpose for which the information is required.

Question 8

What is the 6 way split of cost by element?

Answer 8

Direct Materials
Direct Labour
Direct Expense

Indirect Materials
Indirect Labour
Indirect Expense

Question 9

How can overheads be classified?

Answer 9

Factory/production
selling and distribution
administration
finance
other as appropriate for the organisation

Question 10

What are the behaviour of costs?

Answer 10

Fixed
Semi-variable
Variable

Question 11

What is the formula for the total cost of producing a unit of output?

Answer 11

direct costs + indirect cost
divided by
number of units of output

Question 12

What does a cost statement and profit and loss show?

Answer 12

Cost statement shows the total direct costs and overheads

A statement of profit and loss shows revenue minus the total costs = profit