Methods of costing Flashcards
What is unit costing ? P167
- Cost incurred - production of one cost object
What is a cost object ? P167
- Unit of product, service, activity - costs ascertained
What to remember about unit costing principles and how unit costs are calculated ? P167
- Same principle - whatever method of costing used
- costs of production or output / number of costs units = unit cost
What are the four unit costs that can be calculated ? P167
- Prime costs
- Marginal costs
- Absorption costs
- Total costs
What does each of the four unit costs include and what are they ? P167
- Costs of production
*Direct costs
*Indirect costs ( fixed production overheads)
*Fixed non-production overheads
What is the prime costs of production ? P167
- Direct materials + direct labour
How to calculate the marginal costs of production ? P167
- Prime costs + variable production overheads
What is the absorption costs of production ? P167
Marginal costs + fixed production overheads
What is the total costs of production ? P168
Absorption costs + fixed non- production overheads
What is specific order costing ? P169
Customer order what they want - before made/ work is done
What are the costing methods used by bussinesses to collect costs, and to calculate the total costs for specific orders ? P169
- Job costing
- Batch costing
- Conjunction with absorption costing - recover costs of overheads
- selling price > recovery of overheads
What is job costing ? P170
- separately identified from other jobs
- job becomes costs unt - costs are charged
What is included within a job costing card and then what comes after this ? P171
- Each job - number to identify it
- each job - separate job costs record - each item - estimates
- Actual costs incurred compared with estimated costs
- Difference = variance
How are the estimated costs in job costings obtained ? P172
- Direct materials - inventory records & purchasing & procurement department
- Direct labour - payroll records
- Overheads - Pre-determined overhead absorption rate - direct labour hours
What is batch costing ? P172
- Identical items - produced together as batch
- Batch is cost unit - costs are charged
How is the total costs per unit under batch costing calculated ? P172
Total batch costs / number of units of output = total costs per unit
Why are batch numbers frequently used ? P172
- Identify Output of a particular time
- Slight production variations
What is an alternative to specific job costing? P175
- Continuous work
What is the continuous work method of costing ? P174
- both manufacturing and service industry continuous rather than separate jobs
- Specific job costing methods - those types of businesses
- service costing mehtod - bus company - continuous service for customer use- output
- unit costing method - manfacturer for customers - products for customer buy all time - output
What do service businesses use continuous work: service costing for ? P175
Establish - unit costs of the service provided