The fundamentals of costing Flashcards
What are the answers to this criteria for Financial Accounting?
Users:
Purpose:
Law:
Format/style:
Scope:
Information:
Users: External
Purpose: Record historical financial performance and position.
Law: CA06
Format/style: Prescribed by CA06/GAAP/IFRS.
Scope: Historical, cover business as a whole, minimum detail.
Information: Mostly financial.
What are the answers to this criteria for Management Accounting?
Users:
Purpose:
Law:
Format/style:
Scope:
Information:
Users: Internal
Purpose: Assist management in planning / controlling business to make effective decisions.
Law: None
Format/style: Management discretion.
Scope: Flexible, historical, current, future information focus on segments of business.
Information: Financial / Non-financial KPIs.
What is a cost object?
Anything for which costs are determined.
What is a cost center?
A department, process or function where costs can be accumulated.
What is a cost unit?
A product or service for which costs are determined.
What is a composite cost unit?
A cost unit made up of 2 parts.
What is the format / working for a ‘Profit reconciliation statement’?
Marginal costing profit X
+ (Cl Inv - Op Inv) x OAR X/(X)
= Absorption costing profit X
Total costs consists of … ?
Production costs and Non production costs
Production costs consists of …?
Direct (prime) costs: costs that can be directly traced in full to a cost unit.
Indirect production costs: Other costs incurred in producing the product / service.
Direct (prime) costs consist of … ?
Direct materials, labour and expenses.
Indirect production costs consists of … ?
Variable production overhead
Fixed production overhead
What do you always include in Inventory value (production cost)?
MC cost
Direct costs and variable production overheads.
Should you include Fixed production overheads in Inventory Value?
Sometimes
MC - Period cost
TAC - Product cost
What does ‘Fixed costs in total’ graph look like?
FCs remain constant in total within a range of activity levels.
E.g salaries, rent, rates, SL Depn.
What does ‘Fixed costs per unit’ graph look like?
FC per unit of activity will fall as activity levels increase because the FCs are being ‘spread’ over more units.
What does ‘Variable costs in total’ graph look like?
VC vary in total as activity levels changes.
E.g. total direct materials cost increase as output levels increase.
What does ‘Variable costs per unit’ graph look like?
VC per unit of activity remains constant as activity changes.
What does ‘Semi-variable costs in total’ graph look like?
SVC have both fixed and variable element. They are partly affected by change in activity levels.
What does ‘Stepped fixed costs in total’ graph look like?
Costs are constant within relevant range for each activity level but when a critical activity level is reached, total costs incurred increases to next step.
E.g. factory rent, supervisor’s salary
