Chapter 4: Other Costing Techniques Flashcards
What are the two main types of costing systems?
Specific Order Costing
Continuous Costing
What is Specific Order Costing?
Where the work done by an organisation consists of separately identifiable jobs or batches.
Examples:
Job Costing e.g. House Builders
Batch Costing e.g. Baker producing batches of loaves of bread
What is continuous costing?
Where a series of similar products or services are produced as a result of a sequence of continuous operations or processes.
Examples:
Service Costing e.g. Hair Salon
Process Costing e.g. Oil Refinery
What are some methods of joint cost apportionment?
Physical measurement
Market value of production at point of separation
Net realisable value/net relative sales value
What is the formula for throughput contribution?
Revenue - Direct material costs
What is the formula for net profit?
throughput contribution - operating expenses
How do you calculate return on investment?
Net profit/investment
How should inventory be valued in throughput accounting?
Purchase cost of its raw materials and bought in parts
What is a constraint/bottleneck?
Something that limits production at a particular point in the production process
How do you allocate bottleneck resources to products in throughput accounting?
Identify the bottleneck constraint
Calculate throughput contribution per unit for each product
Calculate throughput contribution per unit of bottleneck resource for each product
Rank products in order of throughput contribution per unit of the bottleneck resources
Allocate resources using ranking
How do you calculate the return per factory hour?
Throughput contribution/Time taken on the bottleneck resource
How do you calculate the cost per factory hour?
Total factory cost/Total time taken on the bottleneck resource
How do you calculate the throughput accounting ratio?
Return per factory hour/Cost per factory hour
What is a digital product?
Typically refers to a product that is stored, delivered and consumed in an electronic format
What are the four main categories of costs associated with maintaining and operating digital products post development?
Functional services
Administrative services
Infrastructure services
IT support services
