Online test revision Flashcards
What is gross profit equation
Gross profit = sales - COGS
What is the COGS equation
COGS = Opening inventory + cost of goods manufactured - closing inventory
Define a semi-variable cost
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.
What is the Contribution per Unit equation
Contribution per Unit = Selling price per unit - variable cost per unit
degree of operating leverage equation
Contribution margin / operating profit
what is variable cost on a graph comparing cost and activity level
the gradient of the line
equation for sales units needed for desired profit
sales in £ = fixed cost + desired profit / contribution per unit
what is the equation for units required for BE
fixed cost / contribution per unit
What is considered a relevant cost, variable or overhead?
Variable
define absorption costing
all manufacturing either variable or fixed manufacturing costs are included as inventorial costs
define marginal costing
all fixed manufacturing costs are excluded from inventorial costs. Only variable costs included.
Where is marginal cost inventoried and what is it charged as in income statement
Inventoried in SOFP. Charged as COGS in income statement
What is fixed cost charged as in the income statement
period costs
What is the Product Production Variance (PVV)
the PVV explains whether actual production is above or below the predicted/budgeted income
How do you calculate PVV
(actual units produced - budgeted production units) x budgeted overhead rate per unit
Define contribution margin
shows how much is available to pay the fixed costs such as rent and utilities
Define prime cost
direct cost of a commodity in terms of the materials and labour involved in production
Define conversion cost
direct and labour expenses incurred as a result of the transformation from raw materials to a finished product
Define the step-down method
Service cost centres that service most other service cost centres are apportioned first.
Or the service department with highest costs is reapportioned first.
Define the Direct Method of reapportionment
Reapportions support/service costs ONLY to main operating/production departments.
What type of costs are salaries of managers an example of
Period costs and Fixed costs
What type of costs is the purchasing of spices for cooking an example of
Product costs and Variable costs
