MOB Costing Flashcards
What is the Cost of Production?
Cost of Production refers to the total costs a business incurs for the production of a specific amount of products or services.
What does the term direct costs refer to?
Direct costs refer to any cost that can be directly attributed to the cost of a specific product or service.
What does the term indirect costs refer to?
Indirect costs refer to any cost that cannot be directly identified in the production of a specific product or service.
What does the term fixed costs refer to?
Fixed costs refer to the expenses of a business that do not change regardless of its level of output.
What does the term variable costs refer to?
Variable costs refer to the expenses of a business that change with the level of production.
Contribution formula
Total revenue - Total variable cost
Contribution Per Unit formula
Selling price - Variable cost per unit
Profit using Marginal Costing Method formula
Total Contribution - Total fixed cost
Marginal Costs per unit formula
Variable costs per unit/Units of output
Marginal Costs formula
Change in costs/Change in quantity
Absorption costs formula
Total Costs/Units of output
Profit using the Absorption Costing Method formula
Total revenue - Total Costs
Break-even Units
Total fixed cost/Contribution per unit
Contribution to sales ratio
(Contribution per unit/Selling price) x 100
Break-even Point in Sale
Fixed cost/Contribution to sales ratio
What is a make or buy decision?
Make-or-buy decisions refer to the act of using a cost-benefit strategy to decide if to manufacture a product in-house or purchase it from suppliers
What triggers a Make or Buy decision?
- Production costs and quality
- Managerial decisions and other long term strategies that dictate the company’s operations
- Historical policy decisions
What are the benefits of a Make or Buy decision?
- It can reduce costs and increase capital investment
- It can be a source of competitive edge
What does in-sourcing refer to?
In-sourcing refers to the utilization of a company’s internal team and resources to accomplish tasks, allowing for more control and oversight.
Why would a company in-source?
- Greater control of quality
- Unsatisfactory results from suppliers
- Existing idle production capacity
What does the term outsourcing refer to?
Outsourcing refers to the use of external team members to provide access to specialized expertise and resources in the production of a product.
Why would a business outsource?
- Lack of internal expertise
- Cost reduction
- Reduced risk exposure
