Les questions I've come across Flashcards
Explain the advantages of introducing an ABC system in the business
More realistic cost information for pricing purposes
Better understanding of costs
If overheads are a high proportion of total costs the ABC may be a better way of attributing overheads to products
More useful where a range of products are produced
Explain the disadvantages of introducing an ABC system in the business
Can be more complicated
Can be more costly
Briefly explain the reasons why a separate overhead absorption rate for each department would be preferable to the factory-wide rate
Gives a more meaningful overhead per department
Can be calculated on the basis of what causes overheads in that particular dept
Can take account of complexity by absorbing more overheads from high cost departments
Explain the characteristics and issues involved in the costing of services.
No tangible product Production and sale is instantaneous Cannot build up stocks Usually more overhead cost related to services Can be non profit making
State the advantages of using a budgetary system in an organisation
Functions of budget; Planning Controlling Motivating Measuring performance Communicating Co-ordinating
How do you work out the break even point?
Fixed costs divided by contribution to sales
How do you work out the margin of safety?
sales
Define: Allocation
Identifying where costs are generated and assigning them to that department
Define: Absorption
Assigning overheads to cost units on the basis of units or some other absorption base such as labour or machine hours
Define: Activity based costing
Alternative to absorption costing which identifies activities that cause overheads and apportions overheads on the basis of activity
Define: Apportionment
Sharing out of common costs over departments using bases of apportionment
Define: Job costing
one off items, all different and so are costed individually
Define: Batch costing
small series of identical items. Each batch is different but items within the batch are the same/ The batch will be costed in total then divided by the good units to get the cost per unit
Define: Service costing
Can be job or batch and revolves around the provision of intangible product which cannot be stored and is based on the provision of advice or expertise.
