Definitions

Question 1

Cost object

Answer 1

Anything for which costs are determined

Question 2

Cost centre

Answer 2

Department, process or function where costs can be accumulated

Question 3

Cost unit

Answer 3

Product or service for which costs are determined

Question 4

Composite cost unit

Answer 4

Cost unit made of two parts

Question 5

Direct (prime costs)

Answer 5

Costs that can be directly traced in full to a cost unit (exclude variable production overheads)

Question 6

Periodic weighted averaged

Answer 6

Each issue is valued at the same average price:

Total costs for the period / total units for the period

Question 7

Absorption costing approach

Answer 7

1) Overhead allocation and apportionment
2) Overhead reapportionment
3) Overhead absorption

Question 8

Under/(over) absorbed overheads

Answer 8

Actual overhead incurred  -
Overhead absorbed (actual activity x OAR)

Question 9

Activity-based coating

Answer 9

1) Identify major activities
2) Identify cost drivers
3) Collect activity into cost pools
4) Calculate absorption rate and absorb into cost units

Question 10

Contribution per unit

Answer 10

CPU = sales price per unit - variable cost per unit

Question 11

Profit margin

Answer 11

Sales 100%
Cost of sales 75%
Gross profit 25%

Question 12

Mark up

Answer 12

Sales 125%
Cost of sales 100%
Gross profit 25%