Midpoint Mock Flashcards
Standard costing to assist with budgetary control
3 areas
Benchmark for costs
Improve cost control
Facilitate performance measurement
Cost Unit
What is it and what is the purpose?
A cost unit is a product or service for which costs are gathered together on a cost card. It important to note that a cost unit may not be a single physical unit of production.
(Per midpoint mock answer)
The purpose of cost units is to measure the cost of producing or providing a unit of output or service, so that the business can determine the cost per unit and make informed decisions about pricing, production, and resource allocation.
Cost Centre
Cost centres are collecting points for costs.
This could be by location (such as regional office), a function (such as a department in the factory) or an item of machinery.
It must be possible to ascertain the costs for the cost centres and relate them to the cost units being produced.
(Per midpoint mock answer)
The purpose of cost centres is to identify and allocate indirect costs to the specific activities or departments that incur them.
A cost centre is a location, department, or activity within an organisation that incurs costs, but does not directly generate revenue.
Purpose of budgeting - PRIME
Planning - The process of budgeting forces managers to look at the future and to set out detailed plans that will allow them to achieve targets in each department.
Responsibility - A budget will identify who is reponsible for achieving targets within the budget for each cost centre. The manager in charge of each area of the budget is often referred to as the budget holder. Delegating responsibility in this way means Head office will know who to contact.
Integration - A budget will ensure the activities of different departments are smoothly integrated. This will assist with good communication and co-ordination between departments is happening and encouraging the business to operate as efficiently as possible.
Motivation - A budget will help motivate staff within the organisation by setting targets for them to achieve. This is particularly effective when if the pay of staff is linked to the achievement of the budget.
Evaluation and control - A budget will allow evalution of the actual results to budgets to see if managers have beaten the targets or fallen short. This process is known as control and will allow management to improve performance of business in the future.
Time Series analysis
what is it and why is it used?
A series or figures recorded over a period of time.
(MIDPOINT MOCK)
Time series analysis is a statistical technique used to analyse data that is collected over time. It is used to identify patterns, trends, and relationships in time-based data and to make predictions about future events based on past observations.
