Extras Flashcards
What is ABC costing?
This costing involves examining the costs to determine what causes them and using this information to charge to costs to the units of output.
Why use abc costing for decision making?
Gives a more accurate overhead cost and therefore more accurate product costs. Decisions about selling prices and profitability of products will be based on more accurate information.
What is standard costing?
This system is planned or established for each item produced. Actual costs are monitored and compared to standard to identify the variances.
Advantages of standard costing?
Allows a company to analyse the cause of the variances such as material usage - production, material price - purchasing.
Disadvantages of standard costing
Time consuming to set up but this may outweigh with the benefits it could bring to a company
What does centralisation mean?
It refers to hierarchical level within the organisation that has authority to make decisions.
What does decentralisation mean?
When decision making is delegates to senior managers or organisation levels
What is a budget committee?
Someone appointed by the managing director to set, agree and take responsibility of producing the budgets . (Managers from different departments)
What is a master budget?
This budget is brought together by all the subsidiary budgets in order to create a budgeted P/L, BS and CB
Closing inventory formula - operating profit
Total cost of production / production units X Closing inventory of finished goods
What does window dressing mean?
Misleading representation of finically statements or information such as valuing inventory incorrectly to prevent higher profits = more tax payable
What is a type of analytical method of evaluating the worthwhile to improve internal controls?
Cost benefit analysis
What is budgetary slack?
Deliberate over estimations of revenue or under estimations of expenses
What is a firewall system?
A system that prevents eternal people accessing any part of the system.
What is goal congruence?
When all parts of the organisation works towards the same goal
