Chapter 5 - Methods Of Costing Flashcards
Unit costing is…?
The cost incurred to produce one cost object
A cost object is a unit of…?
product, service or activity
An example of a cost object in unit costing for a manufacturing business could be ?
Each item manufactured
An example of a cost object in unit costing for a restaraunt could be ?
Each meal served
An example of a cost object in unit costing for a transport company could be ?
Each passenger per mile
An example of a cost object in unit costing for a hospital could be ?
each patient per day
What is the calculation to work out unit cost ?
Unit cost = cost of production or output / number of cost units
What are the four unit costs that can be calculated ?
Hint - P….., M……, A………, T……c…….
- Prime cost
- Marginal cost
- Absorption cost
- Total cost
How is the prime cost calculated ?
Direct materials + Direct labour
How is the marginal cost calculated ?
Prime cost + Variable production overheads
How do you work out the absorbtion cost ?
Marginal cost of production + (Indirect cost) Fixed production overhead
How do you work out the total cost ?
Absorption cost + Fixed non-production overheads
When would Job costing most likely be used ?
Job costing is used when each job can seperatley be identified from other jobs
When would Batch costing most likely be used ?
Batch costing is used when a business is producing a lot of the same product aka batches of something
