chapter 2 cost type Flashcards
what point of cost accounting and financial accounitng
cost : provides info to make decisions
financial : finds profit for a period
how are cost and financial accounting linked?
linked by cost type accounting
what does it mean by attributability of costs
direct or indirect
what meant with nature of input as a classification citerion for a cost type
material, personnel, machine etc
dependance on output variance means?
so if the type of cost is sensitive to output amount
variable or fixed
position in value chain?
manufacturing, selling and shippping, etc.
origin of input goods
primary costs (outside of company), secondary costs (internal)
how many cost types on average in company
800
one benefit of more type of costs and more effort?
improve decision making with precise info
auxiliary mterails?
paints adhesive (artificial indirect costs)
what attributability do operating materials have (direct/indirect)
indirect costs (oils greases)
inventory method
consumption = beginning inventory + acquisitions - ending inventory
carrying on method
Consumption= directly recorded (differences because stolen, measurement errors, need person to hand out materials and cosument)
retroactive accounting method
consumption = bills of material ( need inventory taking, difference bc stolen, bills of material need up to date keeping)
FIFO
delivered fist is consumed first
LIFO
material delivered last is consumed last
ex post average price method
average purchase prices for all cosnumed material at end of accounting (take all prices and average them at the very end)
moving average price method
take average after every new delivery and price
5 types of personnel costs
salary ( each month) time wage( hourly wage) piece rate wage (per piece) premium wage ( premium if good performance, bonus) fringe benefits( car additionally)
5 types of machine costs
depreciation, interest cost ( finance payments), leasing/rental payment , acquisition related costs, maintenance costs (repair)
3 types of TIME dependant depreciation methods
straight line, declining balance, arithmetic degressive
1 type of OUTPUT dependant depreciation method
units of production depreciation
straight line depreciation
(acquisition value - residual value) / useful life
declining balance depreciation
p is depreciation percentage
p =
1- square root with using useful life as square root number (residual / acquisition)
depreciation value decreases over time
arithmetic degressive
d is depreciation rate
d = (acquisition - residual)/ 1 + 2 + .. + useful life
depreciation amount decrease each year by constant value
units of production
(acquisition - residual) / total units of production
interest cost formula
capital required for operations x interest rate
4 steps of find interest cost
- assets needed for operations
- monetary value of assets
- determine capital required for operation (deduct NIBL from operating assets)
- find interest rate
what do you normally exclude from NIBL
provisions, revenues received in advance accounts payable
what a are provisions
money set aside from profits to cover unexpected liability (no interest there )
why are accounts payable NIBL
money still need to pay suplliers (no need to pay interest there)
why are advances recived NIBL
like revenues recieved in advance
what are accruals
accruals are like provisions (so accrual is a plan to pay something, and you need provisions (money set aside) to handle accruals which will be payed later)
are retained earnings NIBL?
no need to pay interest ( need to pay divends on retained earnings)
Are loans NIBL?
no, need to pay interest to bank
are common stocks NIBL?
no need pay interest bc they are stocks so dividents
are current year earnings NIBL
no, need to pay dividents
are accounts payable NIBL?
yes, this is money you need to pay suppliers so no interest pay involved
whats a good thinking when deciding something is NIBL
do you need to pay anyone a bit ? if you need to still pay someone bacl like suppliers, or plan on spending something (provisions) or have sai you will pay something (accruals), or revenues recieved in advance (has nothing to do with anyone) then you dont need to pay anyone.
How to find WACC
WACC = cost of equity x (equity/equity + debt)
1 cost of debt x (debt / equity + debt) ( 1- tax rate)
how to find capital asset pricing model
r = risk free interest rate + company risk factor r = rf + beta ( rm - rf)
