Management Accounting Flashcards
what is meant by cost
how much producing something costs.
what is meant by revenue
the cash that flows into a business from the sale of goods or services.
what is meant by profit
The money that is left over from the sales of goods once other costs such as wages have been paid for. it is the capital left over which
what is meant by total cost
The total costs of a business producing a particular product.
what is meant by average cost
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what is meant by fixed cost
costs that do not change as the output changes.
what is meant by variable costs
costs that are directly related to the level of output or sales
what is meant by total revenue
the number of sales and how much they were sold for.
what is meant by price
How much a product was sold for.
what is meant by average revenue
The average revenue received for a single item sold
what is a direct cost
costs that are directly attributable to a unit output
what is a indirect cost
costs that can not be attributed to a particular unit output.
what is a overhead cost
costs that can not be attributed to a particular unit output.
what is the impact of costs and revenue on business decisions
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what is the impact of costs changing on a business and its stakeholders.
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what is a cost centre
A specific part of the business where costs can be identified and allocated with reasonable ease.
what is a profit centre
profits coming in are ascribed to different parts of a business
how can cost be allocated using full cost allocation
Full cost plus pricing seeks to set a price that takes into account all relevant costs of production
how can costs be allocated using absorbtion cost allocation
All the indirect costs or overheads of a business are absorbed by different cost centres
how can costs be allocated using marginal cost allocation
fixed costs and overheads are ignored and the business considers only the variable costs of production.
how can the allocation of costs affect a business and its stakeholders
- stakeholders will look at the ‘bottom line’ as it will affect their dividends
- employees may be affected by the accuracy and relevance of the method used and therefore this will impinge upon sales and therefore the likelihood of retaining their job or gaining any bonuses that may be linked to profits.
- management decisions will be made on the basis of the costing methods used and therefore their reputation may be affected
- suppliers will be affected by how much a business is prepared to pay for its suppliers, which in turn will be influenced by the method of costing used.
- banks and other loan sourced will look at the level of profits to help assess the ability of a business to pay back any such loan.
What is meant by ‘break-even’
the point where total revenue is equal to the costs (TR=TC)
what is meant by contribution
the revenue received for selling a product minus the variable costs of producing that good.
what is meant by margin of safety
the difference between the actual level of output and the break-even level.
