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CIMA P1 - Management accounting > Chapter 4 - Other costing techniques > Flashcards

Chapter 4 - Other costing techniques Flashcards

1
Q

What are the 2 main types of costing system?

A
  • Specific order costing
  • Continuous costing
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2
Q

What is job costing?

A
  • Form of specific order costing
  • Production made of individual jobs
  • Job is the cost unit
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3
Q

What is batch costing?

A
  • Form of specific order costing
  • Suitable for batches of identical costs
  • TC/batch units = cost per unit
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4
Q

What is product costing?

A
  • Form of continuous costing
  • Suitable when g/s are received from continuous orders
  • Used for mass production
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5
Q

What is service costing?

A
  • Form of continuous costing
  • TC includes same cost as manufacturing but overheads may be bigger than direct costs
  • TC/service units = cost per unit
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6
Q

What are joint products?

A

2+ products separated during processing, each have a high saleable value

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7
Q

What is an example of joint products?

A

Petrol and paraffin

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8
Q

What are by-products?

A

Outputs of value produced identically in manufacturing a main product

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9
Q

What is an example of a by-products?

A

Bark and sawdust

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10
Q

What are the main bases for apportionment of joint products?

A
  • Physical measurement
  • Market value
  • Net realisable value
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11
Q

How are the proceeds from the sale by-products accounted for?

A

Either:
- Pure profit
- (Proceeds-selling costs) used to reduce cost of main products

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12
Q

What is throughput accounting?

A

Primary goal is to maximise throughput while maintaining/decreasing inventory and operating costs

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13
Q

What 3 concepts is througput accounting based on?

A
  • Throughput
  • Inventory
  • Operating expenses
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14
Q

What is throughput a measure of?

A

Profit

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15
Q

What is the formula for throughput?

A

Sales revenue - direct material costs

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16
Q

What are the main assumptions of throughput?

A
  • Only raw materials cost is variable
  • Direct labour costs not variable in the short term
  • Total of all other costs called total factory costs
17
Q

What is the aim of throughput accounting?

A

Maximise measure of throughput contribution

18
Q

What are the 2 key impacts of throughput accounting on the management accounting system?

A
  • Inventory valuation
  • Decision making
19
Q

What is a bottleneck?

A

Factors that prevent the throughput being higher

20
Q

How is a bottleneck identified?

A

Machine that produces the least

21
Q

How can bottleneck problems be resolved?

A
  1. Identify bottleneck
  2. Calc throughput contribution per unit for each product
  3. Calc throughput contribution per unit of bottleneck
  4. Rank products from high to low
  5. Allocate resources using ranking
22
Q

What is the formula for the throughput accounting ratio (TPAR)?

A

Return per factory hour/cost per factory hour

23
Q

What is the formula for return per factory hour

A

Throughput contribution/product’s time on bottleneck resource

24
Q

What is the formula for cost per factory hour?

A

Total factory cost/total time on bottleneck resource

25
Q

What does the return per factory hour show?

A

Value added by organisation

26
Q

What does the cost per factory hour show?

A

Cost of operating factory in terms of overheads

27
Q

What does the TPAR measure?

A

Return from product against factory running costs

28
Q

What does a TPAR > 1 mean?

A

Return exceeds operating costs, product makes a profit

29
Q

What does a TPAR < 1 mean?

A

Return is insufficient to cover operating costs, results in a loss

30
Q

What are the criticisms of throughput accounting?

A
  • Concentrates on short term
  • Difficult to apply long term
31
Q

Why are digital products more difficult to cost?

A
  • MC can be 0
  • No standard time/cost
  • Drivers for overheads difficult to determine
  • Timing of costs difficult to estimate
  • Lifespan can vary
32
Q

What are the benefits of digital costing systems?

A
  • Real time info
  • Access to wider resources
  • Reduced operational costs
  • Better understanding of costs
  • More accurate costing
  • Improved communication
  • Faster decision making
  • Improved cost control

CIMA P1 - Management accounting (13 decks)

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