Calculate unit costs Flashcards
FIFO
A method of pricing materials based on the cost of the oldest units held regardless of the sequence in which the issue of the materials takes place
LIFO
A method of pricing materials based on the cost of the newest units held
regardless of the sequence in which the issue of the materials takes place
Average cost
a method ‘used to price issues of goods or materials at the weighted average cost of all units held.
Absorption costing
The direct (or prime) cost of an item plus a fair share of the indirect (overhead) costs
Allocation
The process by which overheads are charged directly to cost centres
Apportionment
A process where indirect (overhead) costs are spread fairly between cost centres
Overhead absorption
The process whereby overhead costs allocated and apportioned to production cost centres are added to direct unit, job or batch costs
Blanket absorption rate
An absorption rate used throughout a factory for all products irrespective of the department in which they were produced
Job costing
The costing method used where work is undertaken to customers’ special requirements and each order is of comparatively short duration
Contract costing
A form of specific order costing where costs are attributed to contracts
Batch costing
A costing method applied where a group (batch) of identical items is treated as a cost unit. The cost per item = total batch cost ÷ number of items in the batch
Process costing
A form of costing applicable to continuous processes where process costs are attributed to the number of units produced
