Costing and Pricing Flashcards
Prime cost
Total direct costs (labour + materials + expenses e.g. royalties)
Relevant range
e.g. only fixed for levels of activity within a certain range (supervisors)
Responsibility accounting
segregates revenue and cost into areas of personal responsibility to monitor and assess performance
Responsibility centre
department of function who performance is the direct responsibility of a specific manager
Periodic weighted average price: Formula
(Cost of opening inventory + Total cost of receipts) /(Units in opening inventory + total units received in period)
Absorption costing
a share of the total production overhead is added to the prime cost
List the absorption costing steps
- Allocate and apportion
- Reapportion service CC to production CC
- Absorb overheads into cost units
Overhead absorption rate (OAR): Formula
production overhead / activity level
OAR per unit
OAR per machine hr x machine hr per unit
Predetermined OAR
Budgeted OH / Budgeted activity level
Overhead absorbed
Actual activity x Predetermined OAR
Activity based costing
Each type of overhead is absorbed using a different basis and use separate OARs
Job costing
Each separately identifiable cost unit or job is of relatively short duration e.g. fitting kitchens
Batch costing
Each separately identifiable cost unit would be a batch of identical items e.g. manufacturing components
Contract costing
Each separately identifiable cost unit is of relatively long duration e.g. building offices
