Module 5 Budgetary Planning, Cost Accounting and Management Decision Making (p2)

Question 1

What does the term ‘overhead’ mean?

Answer 1

Any cost which doesn’t relate to one specific product (ie rent, machine cost, supervisor salary etc…)

Question 2

What is the formula to work out difference in profit between Marginal costing and Absorption costing

Answer 2

Diff in prof = OAR x Stock Movement

Question 3

What are the steps of the Three stage approach on overheads?

Answer 3

Step 1: Apportionment
Step 2: Reapportionment (service costs)
Step 3: Absorption

Question 4

What is the formula for Pre determined OAR

Answer 4

= budgeted overheads / budgeted basis

Question 5

What is the formula for Period-End OAR

Answer 5

= actual fixed production overheads / budgeted basis

Question 6

What is the formula for Actual OAR

Answer 6

= actual fixed production overheads / actual basis

Question 7

If Actual production = Budgeted production use which OAR?

Answer 7

Period End

Question 8

If Actual production > Budgeted production use which OAR?

Answer 8

Actual

Question 9

What is contribution equal to?

Answer 9

=Sales revenue - variable cost of sales - variable non production costs

Question 10

Does cost of sales ever include non production costs?

Answer 10

NO