L1 Management Info. Flashcards
How to find Total cost?
Linear method can be used
Total cost= fixed cost + variable cost
TC=FC+VC
Explain the linear method (y=a+bx) for finding total cost.
y- total cost (dependent variable)
a- fixed cost (the intercept)
b- variable cost per unit (the gardient)
x- # of units (independent variable)
How do you find variable cost?
Highlow method
highest cost-lowest cost
__________________________
highest act. level- lowest act. level
HC-LC / HAL-LAL
Only done for variable cost
How do you find Fixed cost?
Linear method can be used
Fixed cost= Total cost - variable cost
FC=TC-VC
What is a cost unit?
The determination of the selling price of a product by analyzing the W.I.P.
Finding the cost to make one product by analyzing the WIP
What is a cost object?
The item or activity being analyzed
Define materials:
Classification by element
materials purchased for production and non production activities
eg. raw materials, cleaning supplies, stationeries
Define Labour:
Classification by element
Staff costs to those on the organizations payroll
Define Expenses:
Classification by element
other cost not related to materials or labour
eg. paid services, rent, sub-contractors
Define direct cost
Classification by nature
cost directly identified with a specific cost unit
Whatever is need to make that specific product
Define Indirect cost/ Overheads
- Cost NOT directly identified and therefore must be shared equally.
- includes small amts of direct cost which can’t economically quantify to one cost unit.
Define Production or Manufacturing costs
Classification by function (Indirect/ Overhead cost)
cost associated with making the product
Define Non-Production Cost
Cost not associated with making the product
Define Variable cost
Costs which change in direct relation to a change in production level.
Define Fixed cost
Costs which remain the same irrespective of production level
