Cost Accounting Flashcards
Cost centre
Location in a business in which costs can be identified
Production department in a factory or maybe the canteen
Profit centre
A location in a business for which both costs and revenues can be identified.
Cost by elements
Material
Labour
Expense
Costs by behaviour
Fixed costs
Variable costs
Semi variable costs
Cost by function
Production
Administration
Selling and distribution
Cost by nature
Direct
Indirect
Fixed costs
Costs that are….
Unaffected by the volume of production
Variable costs
Costs that…
Increase in line with production volume
Mixed costs (semi variable) are a mix of…
Fixed costs and variable costs
Cost card
Direct costs (material and labour) = prime costs
Add indirect costs (variable overheads and fixed overheads)
= total production cost
Just in time inventory management
Organisations holding as little inventory as possible
Purchasing raw materials ‘just in time’ for them to be sold to customers
Buffer stock
Holding a minimum level of stock
Economic order quantity (EOQ) model
Helps to identify the number of units to order from suppliers each time in order to keep the total costs to a minimum
EOQ =
Square root of 2cd/h
C = fixed cost incurred when order is placed D = annual demand for the material being ordered H = cost of holding one unit for one year
Reorder level
Maximum usage x maximum lead time
