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AAT - Management Accounting: costing > Further aspects of costing > Flashcards

Further aspects of costing Flashcards

1
Q

What must I learn from further aspects of costing? P131

A

GRAPPLE
G- Gains and losses in process costing
R- record costs info - unit, job , batch, service costing
A - activity levels on unit costs- explain & calculate
P - by product calculation- costs, contribution , reported profits
P - processing costing - cost per unit
L - losses in processing costing
E - equivalent unit - calculate costs

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2
Q

Why must an orgnaisation need to identify a costs of making/providing one unit of product/service ? P132

A
  • set selling price
  • direct costs covered
  • fixed costs are covered
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3
Q

How are effective selling prices achieved? P132

A

achievable forecasts = sensible demand levels

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4
Q

What does forecasting costs require? P132

A

understanding:
* quantities of inputs + average costs of inputs & their behaviour

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5
Q

What principle does forecasting unit costs use?P132

A
  • Marginal costing principles - variable oor fixed
  • semi variable costs = constituebt elements
  • fixed costs - reviewed - step fixed andc increase in value
  • discounts = activity iincrease = variable costs of a unit may fall
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6
Q

What must you when yoou’re forecasting costs at different activity levels?P133

A
  • Reasonableness check
  • costs per uni is significantly different = calculation error
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7
Q

How do some organisations undertake work? P136

A

Specific needs of a customer

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8
Q

What must the price for job costing cover? P136

A
  • Cost incurred
  • as well as making a profit
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9
Q

What is job costing usually used in conjunction with? P136

A

Absorption costing

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10
Q

How does an organisation keep records of indiviual jobs for job costing ? P136

A

Job sheets - costs invoolved + mark up for profit

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11
Q

How are control of costs kept in job costing? P137

A
  • Actual costs compared to budgeted costs
  • differences = identified quickly & corrective action taken
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12
Q

What is batch costing ? P138

A

Identical items as batch

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13
Q

How is costs per bAtch calculated? P138

A

total costs incurred (estimated) / number of batches produced = cost per batch

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14
Q

How is the cost per unit calculated in batch costoing ? P138

A

Total batch cost / number of units in batch = cost per unit

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15
Q

Why are batchh numbers used ? P138

A
  • Variation in materials
  • Customer requires more than one unit - items that mmatch
  • products sold recalled - use of batch number
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16
Q

What is service costing ? P138

A
  • Calculating the cost of service provided
  • costs per unit = service offered
  • laboour = majority of cost of service & overheads
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17
Q

What is process costing ? P139

A
  • Valuing unit of output
  • result of one or more stages of production
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18
Q

What process requires process costing ? P139

A

Continuous process

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19
Q

How are units treated in process costing and how is the cost pper unit calculated? P139

A
  • Units are identical
  • total costs ( material , labour , and overheads) / number of units pproduced
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20
Q

How are materials converted into output ? P140

A

Conversion costs

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21
Q

How are all the costs of a particular process gathered ? p140

A
  • process account
  • more than one process = more than one accout
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22
Q

Where are material and conversion costs all entered into on the process account ? P140

A

Debit side

23
Q

Where is the output entered on the process account ? P140

A

Credit side

24
Q

How is the process account different from the normal ledger account ? P140

A
  • records quantity of materials
  • records the unit costs
  • records the total costs
  • quantities & total coosts must balance
25
Q

How do you calculate the costs of oone unit of output under processing costs ? P141

A

Total process costs incurred / number of uniuts produced = cost per unit

26
Q

What is a normal llooss ? P143

A

Expected to occur

27
Q

How do losses occur and what does this impact ? P143

A

Output not the same as input
Evaporation and wastage
impacts valuation of cost per unit

28
Q

Where is a loss processed on the process account ?

A
  • Credit side
  • waste product = potential proceeds
  • evaporation = no proceeds
29
Q

Where is a loss processed on the process account ? P143

A
  • Credit side
  • waste product = potential proceeds
  • evaporation = no proceeds
30
Q

How are no proceeds from a normal loss recorded in a process account ? P143

A
  • Zero
  • Total costs / actual output quantity = cost per uunit
31
Q

How shoould the credit side of the process account appear once the calcualtion has been made for normal loss ? P144

A
  • Kgs annd total cost still balance
  • unit costs increase = total cost spread over fewer units of output
32
Q

Why dooes the cost per unit need to be amended for waste products? P144

A

incorporate reduction in cost - proceeds of the sale

33
Q

Why does the number of units need to be adjusted for waster producs ? P144

A

Reflect lower quanntity of production

34
Q

What is the calculation for the cost per unit under on output credit side kf process account? P144

A

Total input cost - scrap value of normal loss / expected units of output = cost per unit

35
Q

What is an abnormal loss ? P145

A

Actual output lower

36
Q

Where is abnormal loss recorded and how is it valued ?

A

Credit side of process account
cost per unit

37
Q

How is the costs per unit calculated in relation to abnovrmal loss ( might need to check again ) P146

A

cost per unit = output cost per unit

38
Q

How should the credit side of the process account apppear after abnormal loss P146

A

Columns for kg and total costs balance

39
Q

What are the steps for process costing ? P149

A

Step1 - inputs on debit
Step 2 - normal loss - credit side
Step 2 - output - credit side
Stpe 4 - total value of input - scrap value/ expected output quantity = unit cost of output
step 5 - balance off = credit side ( abnormal loss) / debit side (abnormal gain) - same unit costs as output

40
Q

What are work in progress within process costing ? P149

A
  • only partly complete
  • e.g. complete material and incomplete labour
41
Q

What is the adjustment for work in progress within process costing called? P150

A

Equivalent units

42
Q

How are equivalent units calculated? P150

A

number of units in progress * degree of completeness = opening wip equivalent units
Started and finished equivalent units identified
Closing wip units * degree of completeness = closing wip equivalent units

Opening + starting and finish + closing = equivalent units

43
Q

What is the cost per unit calculation within process costing when work in progress is taken into account ? P150

A

Total cost of productuion/ equivalent units of output = cost per equivalent unit

44
Q

What do the equivalent unit calculations need to take account of ? P150

A
  • opening work in progress
  • closing work in progress
  • number of units started and completeed
45
Q

What does the equivalent unit calculation consider with the opening balance? P151

A
  • remaining balance to be completed
  • e.g. 20 % complete for labour = 80% left to be completed
  • opening WIP units * 80% = amount within that’s left to be completed
46
Q

What does the equivalent unit calculation consider with the closing balance? P151

A
  • Amount already completed
  • e.g. 20% complete for labour
  • opening WIP units * 20% = amount that has been completed
47
Q

Can equivalent unit calculations apply for direct materials ? P152

A
  • Yes
  • beginning of a process
  • labour incurred throughout process
48
Q

What do the bookkeeping entires for process costing include? P152

A
  • Transfer:
  • the losses
  • gains
  • output
  • from process costing account
49
Q

How is a production overheads account used ? P152

A
  • Control account
  • Overheads - transferred to work in progress
  • Under/ over abosprtion - transferred to P/L
50
Q

What is the double entry for inputs into the process ? P152

A

Debit : process account
Credit process account - mmaterials , labour , direct expenses , production overheads

51
Q

What is the double entry for normal loss with scrap sales? P152

A

Debit: normal loss account
credit : process account

52
Q

Double entry for abnormal loss ? P152

A

Debit - abnormal loss account
Credit: Proces account

53
Q

What is the double entyr for abnormal gain ? P152

A

Debit - process account
Credit - abnormal gain account

54
Q

What is the double entry for output ? P152

A

Debit - finished gooods account
Credit - proces account

AAT - Management Accounting: costing (10 decks)

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