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MI > Costing > Flashcards

Costing Flashcards

1
Q

What are the 2 main types of costing?

A

Absorption and marginal

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2
Q

Does MC have anything to do with FOH in the per unit cost calc?

A

Never

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3
Q

Does the AC reflect the FOH in the per unit cost calc?

A

Yes

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4
Q

How is the absorption rate calculated?

A

Bud FC/ Bud Units

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5
Q

What are the 4 categories production cost can be broken down into?

A

Materials
Labour
VOH
FOH

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6
Q

How can the difference in P/L between MC and AC be checked?

A

AR x Change in inventory

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6
Q

What is an example of VOH?

A

Supervisor costs

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7
Q

Are sales the same for MC and AC?

A

Yes

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8
Q

Which costing method gives a higher value of inventory?

A

AC

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9
Q

How is the AR worked out using labour cost per hour?

A

Labour cost per hour/ variable labour unit cost (decimal)

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10
Q

What are direct costs?

A

Materials and labour costs

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11
Q

What is a stepped fixed cost?

A

Fixed up until a certain point

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12
Q

What is the absorption rate always based off?

A

Budgeted info

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13
Q

How is the absorbed amount calculated?

A

Actual units produced x AR

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14
Q

How is prime cost worked out?

A

Materials + Labour cost per unit

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15
Q

What is prime cost?

A

total of all direct costs (materials and labour)

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16
Q

What is an example of a step cost?

A

Machine hire

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17
Q

What would be the most suitable for monitoring and controlling the costs incurred by a freight transport organisation?

A

Cost per tonne-kilometre

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18
Q

What are regarded as cost objects?

A

Operating theatre in a hospital

Branch of a high street bank

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19
Q

What is the amount of overtime premium paid to production line workers would normally classed as?

A

Factory overheads

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20
Q

What are wage payments for idle time of direct workers within a production department are classified as?

A

Factory overhead

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21
Q

What are indirect labour costs made up of?

A

Idle time costs and overhead premiums

22
Q

What is true of direct costs?

A
  • Can be traced in full to the product, service or department that is being costed
  • Might be an indirect cost of a different cost object
  • Expenditure on direct costs will probably vary every period.
23
Q

What’s another name for indirect costs?

A

Overheads

24
Q

What is the cumulative weighted average cost method?

A

Total costs/Total units = new cost

New cost x units sold = ans

25
Q

Under FIFO, what will the inventory valuation be close to?

A

Replacement cost

26
Q

Under LIFO, what value are inventories close to?

A

Current market value

27
Q

What is a disadvantage of the weighted average method?

A

Resulting issue
price is rarely an actual price that has been paid and it may be calculated to several decimal places

28
Q

What makes decision making difficult for both FIFO and LIFO?

A

Variations in prices

29
Q

Assume LIFO, raw materials rising in price, inventories constant, what happens inventories and COS?

A

Higher COS

Lower inventory value

30
Q

With all average price systems where it is required to keep prices up to date, the average price must be re-calculated?

A

Each time a purchase is made

31
Q

What constitutionalises a valid reason for calculating overhead absorption rates?

A

To attribute overhead costs to cost units

32
Q

What is known as spreading common costs over cost centres on the basis of benefit
received?

A

Overhead apportionment

33
Q

How would the salary of the works manager be dealt with when calculating a fixed overhead absorption rate for the factory?

A

Allocated to the factory

34
Q

How would the salary of the logistics manager be dealt with when calculating a fixed overhead absorption rate for the factory?

A

Apportioned to the factory

35
Q

What is true of the determination of the overhead absorption rates?

A
  • Costs can be allocated where it is possible to identify which department caused them
  • Costs need to be apportioned where they are shared by more than one department.
  • There is no need for a single product company to allocate and apportion overheads in order to
    determine overhead cost per unit
36
Q

What is true regarding absorption rates?

A
  • They are usually determined in advance for each period.
  • They are used to charge overheads to products.
37
Q

How is a budgeted capacity calculated?

A

Calculate the budgeted overheads and the overhead absorption
rate

38
Q

What does activity based costing involve?

A

Tracing resource consumption and costing final outputs

39
Q

Why are JIT systems referred to as pull systems?

A

Because demand from a customer pulls
products through the production process.

40
Q

What costing method is most appropriate for plumbing repairs?

A

Per job

41
Q

What costing method is most appropriate for shoe manufacturing?

A

Per batch

42
Q

Can the procedures used to calculate unit costs in manufacturing industries can equally be applied
to service industries?

A

Yes

43
Q

What items used in costing batches are normally contained in a typical batch
cost?

A

Actual material cost

Absorbed manufacturing overheads

44
Q

Are selling costs included in costing?

A

No

45
Q

What is the calc for contribution?

A

Units x (Selling price - Variable cost)

46
Q

Can absorption costing be the same/higher/lower compared to marginal costing?

A

Yes

47
Q

If the number of units of finished goods inventory at the end of a period is greater than that at the
beginning, what will marginal costing inventory result in?

A

Less operating profit than the absorption costing method

48
Q

When comparing the profits reported under marginal and absorption costing when the levels of
inventories increased what happens?

A

Absorption costing profits will be higher and closing inventory valuations higher than those under marginal costing

49
Q

When comparing the profits reported under marginal and absorption costing when the levels of
inventories decreased what happens?

A

Absorption costing profits will be lower and closing inventory valuations higher than those under
marginal costing

50
Q

What is true regarding mark up?

A

The percentage markup with full cost plus pricing will always be smaller than the percentage mark up with marginal cost-plus pricing.

51
Q

What criteria should be fulfilled by transfer pricing?

A
  • Encourage output at an organisation-wide profit-maximising level
  • Enable the realistic measurement of divisional profit
52
Q

What is a dual pricing system of transfer pricing?

A

The receiving division is charged with the standard variable cost of transfers made and the supplying division is credited with the market value

53
Q

What is the formula for optimum transfer price?

A

External market price - cost savings with internal transfer

MI (10 decks)

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