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aat- level 3 > Costing Methods > Flashcards

Costing Methods Flashcards

1
Q

What is contribution?

A

Selling price per unit less variable costs per unit

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2
Q

How do you calculate the Margin of Safety

A

Budgeted sales volume - the breakeven point

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3
Q

True or False

A relevant cost is one that is unavoidable?

A

False

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4
Q

Are irrelevant costs affected by decision or not?

A

No they are not affected by decision

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5
Q

How is the c/s ratio calculated

A

(Contribution per unit/selling price per unit) * 100

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6
Q

How to calculate inventory holding period?

A

(Inventories/cost of sales)*365

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7
Q

How to calculate trade receivables collection period?

A

(Trade receivables/revenue)*365

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8
Q

How to calculate trade payables payment period?

A

(Trade payables/cost of sales)* 365

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9
Q

How do you work out the working capital cycle?

A

Inventory days+ receivable days- payable days

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10
Q

How do you calculate closing inventory?

A

Open inventory+production-sales= closing inventory

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11
Q

What are indirect costs also referred as?

A

Overheads

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12
Q

What side of the profit and loss would you put an under absorbed overhead?

A

You place it on the debit (DR) side

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13
Q

What kind of accounting has Annual data summarised at year-end?

A

Financial Accounting

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14
Q

What is a cost pool?

A

Cost pools are the amount of money spent on an ‘activity

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15
Q

What is a cost driver?

A

The factor influencing the level of cost. A cost driver is the unit of activity that uses the cost associated with it.

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16
Q

What does it mean if closing inventory is larger than opening inventory?

A

Increase in inventory levels

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17
Q

What happens if inventory levels are decreasing?

A

Then absorption costing will return a lower profit

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18
Q

What does the cost of sales include?

A

Direct material+ direct labour + overheads absorbed

19
Q

How do you calculate budgeted overhead absorption rate(BOAR)

A

Budgeted overheads/budgeted activity

20
Q

How do you calculate overheads absorbed?

A

Actual activity * BOAR

21
Q

What is a cost object?

An example?

A

A cost object is anything that costs can be allocated to.

Costs units and cost centre are examples

22
Q

How do you calculate re-order level?

A

(Avg Usage* Avg lead time)+buffer

23
Q

How do you calculate buffer inventory?

A

Re-order level-(avg wage*avg time)

24
Q

How do you calculate contribution

A

Sales revenue - all variable costs

25
Q

In management accounting it is important that the information produced is?

A

-Fit for purpose (accurate, relevant and complete)
- cost effective
-timely

26
Q

How do you calculate re-order quantity to put inventory levels back to the maximum?

A

Maximum inventory level - buffer inventory

27
Q

Regarding the EOQ formula what elements is it regarding with the following symbols?

A) Co
B) D
C) Ch

A

A) Co
B) D
C) Ch

28
Q

What kind of accounting is used for decision-making?

A

Management accounting

29
Q

What is classification by nature?

A

Whether it is a direct or indirect cost

30
Q

What does a marginal cost include

A

Direct costs + variable overheads

31
Q

What are the four main responsibily centres in a business!

A

1) profit centre
2) investment centre
3) revenue centre
4) cost centre

32
Q

What is the calculation for the high-low method?

A

(Highest cost-lowest cost)
————————————-
(Highest no of units -lowest no of units)

= variable cost per unit

33
Q

What makes up the prime cost

A

All direct costs

34
Q

What are the different functions cost can be categorised in to?

A

1) production

2) non-production costs

3) Depreciation

35
Q

How do you work out a direct labour cost into a single unit of production?

A

Total labour costs
————————- = direct labour
Total no. of units Cost per unit

36
Q

What are the five steps to absorption based costing?

A

1) Group production overheads into activities according to how they are driven
2) identify cost drivers for each activity
3) calculate a cost driver rate for each activity
4)absorb the activity cost into the product
5) calculate the overhead cost per unit

37
Q

How do you calculate the minimum order quantity?

A

Re-order level- buffer inventory

38
Q

What is classification by behaviour

A

It is whether the costs are:
1) fixed
2) stepped
3) variable
4) semi-variable

39
Q

How do you calculate return on investment?

A

Profit/ investment * 100=

40
Q

What is classification by element?

A

Costs incurred are usually split between three main elements

1) Material
2) Labour
3) Expenses

41
Q

How do you calculate the Economic Order Quantity(EOQ)?

A

2* Cost of placing order (Co)* Annual Demand(D)
——————————————-
Cost of holding one unit in inventory for one year(Ch)

Square root of the above calculation

42
Q

What does absorption costs include?

A

Direct costs + variable overheads + fixed production overheads

43
Q

What is meant by lagging

A

The timing difference between when an invoice is issued/received and when it is paid

44
Q

What is meant by liquidity

A

The ability of an organisation to pay its liabilities as they become due to

aat- level 3 (1 decks)

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