Session 5 - Methods of Costing Flashcards

1
Q

What is the prime cost of production?

A

Direct materials + Direct Labour

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2
Q

How to work out marginal cost?

A

Prime cost + varibale production overheads

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3
Q

How to work out absorption cost?

A

Marginal cost + Fixed production overheads

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4
Q

How to work out total cost?

A

Absorption cost + Fixed Non- Production overheads

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5
Q

Fixed non production overheads include?

A

Admin, Selling and Distribution

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6
Q

What is job costing?

A

Used where the product of service is a “one off”

For example: Making one racing bike or preparing one clients accounts

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7
Q

What is batch costing?

A

Used where the output consists of a number of identical items which are produced together as a batch.

For example: Baking a batch of loaves

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8
Q

What is service costing?

A

Method of costing for services eg: running a bus

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9
Q

What is unit costing?

A

Method of costing for continuous manufacturing processes

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10
Q

What are 3 features of service costing?

A

Low level of direct materials in relation to total costs
Intangible output
Use of composite units eg: per passenger/mile

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11
Q

What is the calculation for cost per service unit?

A

Total costs of providing service/number of service units

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12
Q

What is the calculation for cost per unit for unit costing?

A

Total costs of production/number of units for period

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13
Q

What is the calculation of equivilent units?

A

Number of units in progress x completeness (%)

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14
Q

What is the calculation for cost per unit for unit costing including equivalent units?

A

Total cost for production/(number of completed units + equivalent units)

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15
Q

What is abnormal wastage?

A

Any additional waste which aries from normal wastage.

Actual loss - normal loss

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16
Q

What is scrap sales?

A

Any normal wastage which can be sold is known as scrap sales, this is treated as a reduction in the total costs of production

17
Q

How is normal wastage recorded?

A

Normal wastage is credited to the production account, no money amounts are recorded.

18
Q

How is abnormal wastage recorded?

A

Abnormal wastage is credited to the production account, however this time it is recorded as the same unit cost as the finished goods.

It is then debited to a separate abnormal wastage account.

At the end of the year it is then debited to the SPL (increase expenses) and credited out the abnormal wastage account

19
Q

When recording waste in the production account, how do you work out the unit cost of the abnormal waste?

A

It is the same as the finished goods unit cost. This is worked out by the total cost - scrap value/expected output

20
Q

What are the entries in the abnormal waste account?

A

Debit - production (value will be the same in the production account)
Credit - Bank (value will be how much waste is sold for given in the question)

Debit and Credit will likely be 2 different amounts

21
Q

How to find margin in excel?

A

20% Margin = Total cost/0.8*0.2

22
Q

What are product costs?

A

Direct costs incurred to make a product
Direct materials, direct labour and direct expenses and production overheads

Product costs are included in the value of closing inventory

23
Q

What are period costs?

A

Indirect costs which cannot be directly assigned to products

24
Q

How to calculate markup 80% markup?

A

Total cost/100 x 80