Fundamentals of costing Flashcards
Management accounting systems
Provide information specifically for the use of managers within an
organisation
Cost object
Anything for which we are trying to ascertain the cost
Cost unit
The basic measure of product or service for which costs are determined
Direct cost
A cost that can be traced in full to the cost unit
Prime cost
The sum of all the direct costs
Indirect cost (or overhead)
A cost that is incurred which cannot be traced directly and in full to the cost unit
Period cost
A cost relating to a period of time
Product cost
The cost of a finished product made up of its cost elements
Cost behaviour
The way in which costs are affected by changes in the level of activity where ‘activity’ can be volume of output, number of production runs etc
Fixed costs
Costs that, within a relevant range of activity levels, are not affected by increases or decreases in the level of activity
Variable cost
A cost that increases or decreases as the level of activity increases or decreases
Semi-variable, semi-fixed or mixed costs
Costs that are part-fixed and part-variable and are therefore partly affected by changes in the level of activity
The relevant range
The range of activity levels within which assumed cost behaviour patterns occur
Step fixed cost
A cost that is fixed for a certain range of activity but increases to a new fixed level once a critical level of activity is reached
Responsibility accounting
A system of accounting that segregates revenue and costs into areas of personal responsibility in order to monitor and assess the performance of each part of an organisation
