Cost Classification Glossary Flashcards
What is a cost centre?
An area of an organisation where costs are incurred.
What is a profit centre?
An area of an organisation that incurs costs, but also generates income.
What is an investment centre?
An area of a business that incurs costs, generates income and accounts for its own capital employed. It is separate from the main organisation.
What is capital expenditure?
Purchase of no-current assets or the improvement of earning capability of non-current assets.
What is an indirect cost?
An overhead. A cost that cannot be directly attributed to a cost unit but is initially attributed to a cost centre.
What is a cost unit?
A unit of production or a service performed.
What is a variable cost, and give an example?
A cost that changes directly in line with any change in activity, such as units of production.
What is a fixed cost, and give an example?
A cost that stays the same as activity changes, such as building insurance.
What is the relevant range?
The range of activity over which fixed costs will not change.
What are prime costs?
The total of direct costs.
How do you calculate full production cost?
Prime costs plus indirect costs of production.
What is absorption costing?
A costing method that includes all production overheads within the cost of the cost units.
What is another name for marginal costing?
Variable costing.
In activity based costing what are activities?
The elements of overhead costs which cause costs to be incurred.
In activity based costing what are cost pools?
Costs that can be attributed to each activity.
