Cost Classification

Question 1

P.30 - Prime costs are:

Answer 1

Total of direct costs:
- Direct materials
- Direct labour
- Direct expenses

Question 2

P.30 - Overheads are:

Answer 2

Total of indirect costs:
- Indirect materials
- Indirect labour
- Indirect expenses

Question 3

P.42 - Variable cost per unit

Answer 3

= (Cost at high activity - Cost at low activity) ÷ (High level of activity - Low level of activity)

Question 4

P.50 - Coding systems

Answer 4

Sequential code
- In order eg: 1,2,3 or a,b,c
Block code
- Sequential codes grouped together eg: 0000-0999 are expenses codes and 1000-1999 are revenue codes
Hierarchical code
- Each digit represents a classification
- From left to right subset gets smaller
- E.g: 1.1.1, 1.1.2, 1.2.1 etc
Significant digit code
- Digits or letters represent features
- E.g: 2000 are paper sheets, 2010 are packs of 10, 2020 are packs of 20 etc
Faceted code
- Codes broken down into fields
Mnemonic code
- Alphabetical and helps remembering what it represents