lec 9 - full costing

Question 1

direct fost

Answer 1

cost can be specifically and exclusivley ID w a given cost object

Question 2

direct cost aka

Answer 2

prime cost

Question 3

direct cost example

Answer 3

cost of material

direct labour

Question 4

indirect cost

Answer 4

cannot be specifically and exc;svley ID w a given cost object

Question 5

indirect costs aka

Answer 5

overheads

Question 6

how are indirect costsd assigned to csot objects

Answer 6

basis of allocation

Question 7

easy way to think of how to ID direct and indirect cost

Answer 7

cost you can easily asisng to somethign - dirct

not sure you can easily assign to something = indirect

Question 8

overhead cost are allocated

Answer 8

allocated indirect costs

Question 9

total product cost =what 5 things

Answer 9

direct material

direct labour

prime costs - direct costs

manufacturing over heads
total manufacturing costs
non manufacturing overheads

Question 10

why is costing in total product cost so important

Answer 10

infleunces pricing which impacts whole company

Question 11

product cost per unit includes both

Answer 11

direct and indirect costs

Question 12

manudacturing OH

Answer 12

Any indirect cost that relates to manunfacturing of product

e.g depreciation of machinery

Question 13

non manufacturing overhead

Answer 13

indirect cost that doesnt relate to manufacturing process

e.g. HR Salary Cost

Question 14

traditional cost drivers

Answer 14

labour hours

machine hours

Question 15

2 stes of allocation

Answer 15

identify cost drivers

absotroption costing

Question 16

if a product needs e.g. mroe labour hours to be produced it would incur more

Answer 16

overhead

Question 17

do we use both traditional cost drivers

Answer 17

no

either one or the other

Question 18

what is absorption

Answer 18

processof allocating overheads to cost objects

e.g £300 to product B £100 to product C

Question 19

Overhead absorption rate

Answer 19

rate overheads attributed to cost objects based on cost driver

Question 20

e.g. absorption rate is £10 per direct labour hour and product x needs 1 labour hour how much will it be charged in overhead

Answer 20

£10

Question 21

what are the two systems for absorptionr ates

Answer 21

blanket overhead

department overheafd

Question 22

what is blankt overhead absorption rate

Answer 22

same asorption rate given to the whole organisation

Question 23

what is the department overhead absorption rate

Answer 23

diff absorption rates used in diff dpts of organisation

Question 24

how do we assign indirect costs usign the blanket overhead approach

i.e what is overhead rate

Answer 24

cost driver = number of direct labour hours

total OH = 900K
Direct labour hours = 60K

overhead rate = total OH/Direct labour hours

eeryoe uses £15ho

Question 25

how do we assign indirect costs using the departmental overhead rate

Answer 25

OH per department / direct labour hours to get your rate

then pick whic you want to use

Question 26

how do we decide whihc absorption ragte to use

Answer 26

if product uses 100% of a single dpt resources to use we use that dpt

but if goes through multiple dpt use blanket

Question 27

if we use the blanket overhead rate what will be the effect

Answer 27

charge will be higher then dpt

Question 28

steps to calculate overhead absorption rate per unit (trad method using cost drivers

Answer 28

1 = total OH /total hours (cost driver)

2= multiply answer by each differnt total hour

3= divide absorbed OH by the units to get OH per unit

Question 29

break

Question 30

why do we have activity based costing

Answer 30

to idenitfy csot driver for each activity - as cost drivers practically cant just be limited to labour and manufacturing

Question 31

why can activity based costingbe hard

Answer 31

one product may have so many cost activities so need to find cost driver for each one

Question 32

what do we ignore in the ABC model

Answer 32

labour and machine hours

and dont look at total OH costs but each item thing individually

Question 33

how do we calculate and allocate overheads in the ABC activity model

Answer 33

idenitfy cost and cost driver e.g.store costs and store requisitions

divide cost by cost driver to get individual overhead rate

multiply each over head rate by product e.g oh rate for store cost * store requisitions for product x

reppeat for alk products and differnt costs

then add up all of the costs for each product to get toal overhead of each product