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AAT Level 3 > MAPS - Chapter 1 - Intro to MAPS > Flashcards

MAPS - Chapter 1 - Intro to MAPS Flashcards

1
Q

What is a cost unit?

A

A unit of output to which cost can be charged

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2
Q

What is a composite cost unit?

A

Units of output which comprise of two variables

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3
Q

What’s a responsibility centre?

A

A segment of the business for which a manager is accountable

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4
Q

What is a cost centre?

A

A segment of the business to which costs can be charged

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5
Q

What are positives of cost centres?

A

Allows segmented costs which can assist with control of the business

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6
Q

What is a profit centre?

A

Segments of the business to which costs can be charged, revenue identified and profit calculated

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7
Q

What is a revenue centre?

A

Segments of the business where sales revenue from the product sold or service provided is measured

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8
Q

What differs cost and profit centres?

A

Cost centres do not have any significant revenue

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9
Q

What is an investment centre?

A

Segments of the business where profit is compared with the amount of money invested in the centre

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10
Q

What do you calculate at an investment centre?

A

Return on investment (ROI)

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11
Q

How do you calculate ROI?

A

(Profit/Investment) x 100

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12
Q

What are the three main sections of a manufacturing business?

A
  • Factory
  • Warehouse
  • Office
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13
Q

How can costs be classified?

A
  • By element
  • By nature
  • By function
  • By behaviour
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14
Q

How can cost be classified by element?

A
  • Materials costs
  • Labour costs
  • Other expenses such as rent
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15
Q

Why can classifying costs by element be beneficial?

A

Allows managers to see the breakdown into different kinds of cost

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16
Q

What does classification of costs by nature mean?

A

Whether a cost is a direct cost or an indirect cost

17
Q

What is a direct cost?

A

A cost that can be identified directly with each unit of output

18
Q

What is an indirect cost?

A

All costs, other than those identified as direct costs

19
Q

What is the total of direct costs called?

A

Prime costs

20
Q

What does classification by function mean?

A

It is the costs incurred in different sectors of the business. Basically what department they relate to

21
Q

What does classification of costs by behaviours include?

A
  • Fixed
  • Semi-variable
  • Variable
  • Stepped
22
Q

How do you know which classification to use?

A

Whichever suits the business’ needs the best

23
Q

Why classify costs by element?

A

Can look for high cost elements in order to make savings

24
Q

Why classify costs by nature?

A

Looking at direct and indirect costs to o wee where savings can be made

25
Q

Why classify costs by function?

A

Look at different departments and see which are high-spending

26
Q

Why classify costs by behaviour

A

Business could make savings by altering the balance between fixed and variable costs

27
Q

What does classifying costs help management with?

A
  • Decision-making
  • Planning
  • Control
28
Q

How to calculate costs?

A
  • Identify units of output
  • Calculate units of output for particular time
  • Calculate direct costs
  • Calculate corresponding indirect costs
  • Calculate total cost of unit of output
29
Q

What is another name for the total cost?

A

Absorption cost

30
Q

Formula to calculate cost of a unit of output?

A

(Direct costs + indirect costs) / units of output

31
Q

What’s a total cost statement?

A

Add direct costs
= Prime costs
Add Production overheads
= Production cost
Add non-Production overheads
= Total Cost

32
Q

How to calculate profit?

A

Revenue - Total Cost

33
Q

What are product costs?

A

Cost to he is a part of manufactured product, prime cost + production overheads. This is included in closing inventory

34
Q

What are period costs?

A

Costs not part of manufactured product. They are incurred over a period of time and cannot be included in closing inventory, will be in P+L

AAT Level 3 (22 decks)

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