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
Minimum inventory level
Reorder level - (average usage x average lead time)
Maximum inventory level =
reorder level -( minimum usage x minimum lead time) + reorder quantity
Allocation
Overheads relating to a single cost - entire cost can be allocated to that cost centre
Apportionment
Overheads will relate to several cost centres - split between cost centres
The direct method
Service cost centres only perform work for the production cost centres
Step down method
Service cost centres perform work for other service cost centres as well as the production cost centres
Activity based costing are split into
Cost pools
Costs drivers are….
Factors which cause the particular overhead to rise or fall
Absorption coating sometimes known as…
Full costing
Variable and fixed costs
