D&C 2

Question 1

Overhead absorption rate formula

Answer 1

total production overheads/ total activity level

Question 2

what is a trend

Answer 2

a trend is a movement of a time series over a long period of time

Question 3

what is a time series

Answer 3

a time series is a series of figures or values recorded over time

Question 4

what is a seasonal variations

Answer 4

a seasonal variation is a predicted movement away from the trend

Question 5

what is a cyclical variation

Answer 5

a cyclical variation is a recurring pattern over a long period of time

Question 6

what is a random variation

Answer 6

an random variation is an irregular variation due to rare or chance occurences

Question 7

Limitations of index number

Answer 7

The index must be regularly revised

New products/items may be discontinued

The base year needs to be reviewed periodically

Question 8

Interpolation/extrapolation

Answer 8

Interpolation-forecasts data within the historical data range

Extrapolation-forecasts data outside of the historical data range

Question 9

limitations of forecasting

Answer 9

forecasts from historical data would be accurate, but the actual future results may be different from the forecast figures

forecast figures are based on the assumptions that current conditions will continue in the future

if a forecast is based on a trend, there are always elements or variations which cause the trend to change

Question 10

what is standard costing

Answer 10

standard costing is a system where production costs are recorded for standard products. each unit is expected to use the same quantity and requires the same time to make

Question 11

what are ideal standards

Answer 11

ideal standards are set on the basis that perfect working conditions apply at all times

Question 12

what are target/attainable standards

Answer 12

target standards are realistically achievable but allow normal wastage and inefficiency

Question 13

what are normal standards

Answer 13

basic standards are based on current working conditions which have not changed over time.

Question 14

what is the total variable overhead variance

Answer 14

this compares the standard variable overhead cost for actual production unit to the actual variable overhead cost for actual production unit

Question 15

what is the variable overhead expenditure variance

Answer 15

this compares the standard variable overhead cost of actual hours worked to the actual variable overhead cost of actual hours worked

Question 16

what is the variable overhead efficiency variance

Answer 16

this compares the standard hours for actual production units to the actual hours for actual production units

Question 17

what is fixed overhead expenditure variance

used when greater or fewer units were produced than expected

Answer 17

this compares the budgeted and actual fixed overhead expenses

Question 18

what is the variable overhead efficiency variance

Answer 18

this compares the standard hours fro actual production units to the actual hours for actual production units valued at the standard rate

Question 19

what is the idle time variance

Answer 19

this compares actual hours worked and actual hours paid, valued at the standard rate per labour hour

Question 20

what is the fixed overhead volume variance

Answer 20

this compares the budgeted and actual units produced valued at the standard OAR unit

Question 21

causes of variance- idle time

Answer 21

idle time is always adverse.

the workforce may be unproductive due to machine breakdowns, illness or injury,materials delivered late

Question 22

causes of variance- fixed overhead expenditure

Answer 22

favourable
savings in cost/ change of supplier

adverse
overall increase in the cost or service used

Question 23

causes of variance- fixed overhead volume

Answer 23

favourable

production or level of activity greater than budgeted

adverse
production or level of activity less than budgeted(fewer units that foh can be spread over)

Question 24

what is an uncontrollable variance

Answer 24

this is part of the variance which is from a cause outside the control of the manager responsible

Question 25

what is is a controllable variance

Answer 25

this is part of a variance that is due to controllable operational factors or decisions

Question 26

what is interdependence of variance

Answer 26

reasons for two or more variances may be the same. the factor which causes one variance can cause the other too

Question 27

Advantages of target costing

Answer 27

Improved sales volume and market share
Better relationships with customers
Planned level of profit is achievable
More efficient use of resources
Improvement in production methods

Question 28

Advantages of target costing for the customer

Answer 28

The product or service is attainable at the right price
Better relationship with the supplier as they are more reliable
Prices are reduced without losing quality

Question 29

Name all the stages of the product life cycle

Answer 29

Development
Launch
Growth
Maturity
Decline

Question 30

Benefits of standard costing

Answer 30

Planning
Control
Decision making

Question 31

What is an uncontrollable variance

Answer 31

An error made in the planning of the standard costs.

Question 32

What is a controllable variance

Answer 32

The element within the managers control