Online test revision

Question 1

What is gross profit equation

Answer 1

Gross profit = sales - COGS

Question 2

What is the COGS equation

Answer 2

COGS = Opening inventory + cost of goods manufactured - closing inventory

Question 3

Define a semi-variable cost

Answer 3

A cost which remains constant that becomes variable after a certain point. e.g. a phone bill having a flat rate for 200 minutes then 50p charge every minute after.

Question 4

What is the Contribution per Unit equation

Answer 4

Contribution per Unit = Selling price per unit - variable cost per unit

Question 5

degree of operating leverage equation

Answer 5

Contribution margin / operating profit

Question 6

what is variable cost on a graph comparing cost and activity level

Answer 6

the gradient of the line

Question 7

equation for sales units needed for desired profit

Answer 7

sales in £ = fixed cost + desired profit / contribution per unit

Question 8

what is the equation for units required for BE

Answer 8

fixed cost / contribution per unit

Question 9

What is considered a relevant cost, variable or overhead?

Answer 9

Variable

Question 10

define absorption costing

Answer 10

all manufacturing either variable or fixed manufacturing costs are included as inventorial costs

Question 11

define marginal costing

Answer 11

all fixed manufacturing costs are excluded from inventorial costs. Only variable costs included.

Question 12

Where is marginal cost inventoried and what is it charged as in income statement

Answer 12

Inventoried in SOFP. Charged as COGS in income statement

Question 13

What is fixed cost charged as in the income statement

Answer 13

period costs

Question 14

What is the Product Production Variance (PVV)

Answer 14

the PVV explains whether actual production is above or below the predicted/budgeted income

Question 15

How do you calculate PVV

Answer 15

(actual units produced - budgeted production units) x budgeted overhead rate per unit

Question 16

Define contribution margin

Answer 16

shows how much is available to pay the fixed costs such as rent and utilities

Question 17

Define prime cost

Answer 17

direct cost of a commodity in terms of the materials and labour involved in production

Question 18

Define conversion cost

Answer 18

direct and labour expenses incurred as a result of the transformation from raw materials to a finished product

Question 19

Define the step-down method

Answer 19

Service cost centres that service most other service cost centres are apportioned first.

Or the service department with highest costs is reapportioned first.

Question 20

Define the Direct Method of reapportionment

Answer 20

Reapportions support/service costs ONLY to main operating/production departments.

Question 21

What type of costs are salaries of managers an example of

Answer 21

Period costs and Fixed costs

Question 22

What type of costs is the purchasing of spices for cooking an example of

Answer 22

Product costs and Variable costs