Costing Flashcards
What are full costing systems
When all fixed and variable costs, including manufacturing costs, are used to compute the total cost per unit
What does Job (order) Costing cover
Specific orders, readily identified unique units
What does Batch Costing cover
Group of identical or similar units, costed TOGETHER instead of separately
What does Process Costing cover
Continuous operations, large numbers of nearly identical products
Equation for cost per unit under process costing
Net cost of inputs - Scrap value of normal loss / Expected outputs
What do the step down and direct methods do
they are methods to RE-APPORTION the costs of service departments production departments
What does the step down method do
Re-apportions service department costs to both operating departments AND support departments
What does the Direct method do
Reapportions support costs ONLY to the main operating/production departments
Difference between Apportioning and Re-Apportioning
Apportioning, overheads charged to all cost departments. Re-apportioning, service department costs are charged to production departments
What is the formula for the Overhead Absorption Rate
budgeted expenditure / budgeted activity
Give two advantages of absorption costing
Improved managerial awareness of total costs sustained by cost centres
Selling prices can be established to cover full “product” cost
Give two problems with Absorption costing
Arbitrary re-apportionment of overheads can lead to incorrect decision being taken
Costs are absorbed based on the budgeted overhead absorption rate and therefore an under/over absorption adjustment must be mad
What is marginal costing
Only variable manufacturing costs are included in the costing of inventory. Fixed manufacturing costs are charged directly to the Income Statement as period costs
What is a relevant cost
A cost that will be affected by a decision
What is a non relevant cost with examples
A cost that remains unaltered by a decision.
- sunk costs
- total fixed overheads
