MMAC Section 1 : Costing

Question 1

Cost Objects?

Answer 1

Anything that costs can be allocated to: Cost Units or Cost Centres

Question 2

Cost Units?

Answer 2

A unit of output to which costs can be charged

Question 3

Responsibility Centres?

Answer 3

Individual parts of the business whose manager has responsibility for performance:

Cost Centres
Revenue Centres
Profit Centres
Investment Centres

Question 4

Cost centres?

Answer 4

A specific part of the business to which costs are charged, in addition to being charged to a unit

Production or Service Location
Function
Activity
Item of Equipment

Question 5

Revenue Centres?

Answer 5

Only accountable for business revenue, costs are not allocated to this centre

Question 6

Profit Centres?

Answer 6

Parts of the business where identified revenues and allocated costs are charged.

Question 7

Investment centres?

Answer 7

Profit is compared to the amount of money invested.

Managers can review their return on investment

 Profit /        x 100 = % Return on investment Investment

Question 8

Cost classifaction?

Answer 8

Element (Materials or Labour) > Cost Control

Functions (Production or Non-Production) >Financial Accounts

Nature (Direct or Indirect Expenses) >Cost Accounts

Behaviour (Fixed or Variable costs) >Budgeting/ Decision Making

Question 9

Is Overtime Premium a Direct or Indirect Cost?

Answer 9

It is an Indirect cost, unless it can be related to a specific customer order, in which case it would be direct

Question 10

Wages Control Account

Answer 10

DR CR

Bank (Net Pay)
Production (Direct Labour Costs >WIP)
HMRC ( Payroll Liability)
Production Overhaeds (Indirect Labour Costs)
Pension (Pension Liability)

Trade Union (Trade Union Liability)

Question 11

Group Bonus Scheme?

Answer 11

Excess Units / Standard Units X 50%= % Bonus Rate