Lecture 10

Question 1

costs

Answer 1

the amount of money sacrificed for goods/services to bring a current or future cashflow to the organisation

Question 2

direct costs

Answer 2

every cost that can be easily tracked to a product or service

Question 3

indirect costs

Answer 3

every cost that cannot be easily tracked to a product or service

Question 4

overhead divided into

Answer 4

• manufacturing overhead
• administrative expenses
• selling expenses

Question 5

fixed cost

Answer 5

does not increase or decrease when output varies

Question 6

variable cost

Answer 6

increases or decreases with output

Question 7

mixed cost

Answer 7

has a variable and fixed component

Question 8

Financial accounting

Answer 8

produce financial statement that conveys information to outside parties

Question 9

Management accounting

Answer 9

provides useful information for operation of the company

Question 10

Cost accounting

Answer 10

technical process by which expenses are allocated to products

Question 11

expenditure

Answer 11

an amount of money paid for acquiring an asset or service

Question 12

Expenses

Answer 12

amounts of money which is used during a given year for the production of goods and services sold by the company

Question 13

Relationship between ependiture and expenses

Answer 13

not all expenditures are expenses

Question 14

Process Costing

Answer 14

assigns average costs to each unit of production

Question 15

Job order costing

Answer 15

differentiates the (direct) costs per job (or service) to see how profitable each job is

Question 16

activity based costing

Answer 16

calculates what percentage of overhead should be assigned to a job

Question 17

Depreciation

Answer 17

• expense part of an expenditure that falls within the period
• depreciate according to physical deterioration (or different for tax deductions)

Question 18

Cost Estimation Phases

Answer 18

1. the “decision” phase
2. the “validation” phase
3. the “execution” phase

Question 19

the”decision” phase of cost estimation

Answer 19

• time during which major decisions have to be made about the project
• the cost estimator is to work quickly to assist the decision maker
• focus during this whole phase is the product

Question 20

the “validation” phase of cost estimation

Answer 20

• manager has decided how to technically respond and price for which we have a good chance to be competitive
• cost estimator helps the manager to make sure he will accomplish the project for the cost decided upon
• focus shifts to activities

Question 21

the “execution” phase of cost estimation

Answer 21

• cost estimator must now, periodically decide if the project will remain inside the allocated budget

Question 22

cost estimation based on:

Answer 22

• 30% data
• 30% tools
• 40% judgement

Question 23

conceptual estimate

Answer 23

average costs per standard unit

Question 24

30 to 40% finished design

Answer 24

• many critical design decisions such as building footprint, major equipment etc. have been made
• estimator can develop quantities of work and apply actual unit prices

Question 25

60% finished design

Answer 25

- foundation for second engineering estimate - verify proposed systems and subsystems meet proposed needs - compare original proposed budget with more precise quantities and quality requirements - reviewing drawings and specifications for construction capabilities by a team of construction professionals

Question 26

90% finished design

Answer 26

- complete set of bid documents | - set of documents will be sent to the permitting authorities for their review

Question 27

Accuracy factors

Answer 27

quantity and cost of: - construction materials - labour - equipment

Question 28

Pricing

Answer 28

assigning a dollar value to a work item based on given specifications and the predetermined quantity required

Question 29

Contingency

Answer 29

amount of money added to an estimate to cover unforseen needs of the project, construction difficulties or estimating accuracy