Theory

Question 1

Direct cost

Answer 1

Primarily direct materials and labor, can be assigned ‘directly’ to a given cost object, in that they can be tracked exclusively and specifically to a given product or service.

Question 2

Indirect costs

Answer 2

are those costs that cannot be tracked directly to a specific cost object but which, nevertheless, do impact on that cost object. The term ‘overhead’ is frequently used to describe this cost and may cover indirect costs as disperse as machine depreciation, power costs, supervisors’ wages, factory rent etc. (2) Period and product costs: Product costs are those costs that can be identified with goods purchased or produced for sale and will be included in year-end inventory valuations. In manufacturing all manufacturing costs will be regarded as product costs.

Question 3

Period and product costs

Answer 3

Period costs, including administration and distribution costs, are not included in inventory valuation but are written off as an expense to the ‘period’ in the P&L account. In marginal costing systems, the terms fixed cost and period costs are interchangeable. (2)

Question 4

Fixed cost:

Answer 4

cost not changing, it has no impact on the volume of output

Question 5

Variable cost:

Answer 5

a variable cost is a cost that varies in proportion to the level of production or sales (increase the volume of output ) , example : as the company produces more chairs, it may need to hire additional workers, which will increase the labor cost proportionally or For example, the cost of raw materials used to manufacture a product is a variable cost because it increases or decreases with the number of units produced.

Question 6

A semi-variable

Answer 6

A semi-variable cost is a type of cost that has characteristics of both fixed and variable costs. Initially, the cost remains fixed up to a certain point or level of activity. However, once that point is reached, the cost starts to vary based on the level of activity

Question 7

Relevant and irrelevant and revenues:

Answer 7

( gặp relevant thì phép tính trừ )
Relevant costs and revenue are those future costs and revenues that will be changed by a decision.

Irrelevant costs are revenues will not be changed by a decision.

Question 8

Avoidable and unavoidable cost:

Answer 8

Avoidable costs are those costs that can be saved by not adopting a given alternative.

Unavoidable costs cannot be saved.
Avoidable/unavoidable costs are alternative terms sometimes used to describe relevant/irrelevant costs.

Question 9

Sunk costs:

Answer 9

+Sunk cost: sunk costs are past expenses that should not impact your future decisions because they are irreversible and should be treated as irrelevant when making choices going forward. For instance, imagine you buy a movie ticket for $10. After watching the first 30 minutes of the movie, you realize it’s terrible and not enjoyable. You might feel tempted to stay and watch the entire movie because you already spent $10 on the ticket. However, this decision is influenced by the sunk cost fallacy. The $10 you spent is already gone, and it shouldn’t affect your decision of whether to continue watching the movie or leave and do something else.

Question 10

Opportunity

Answer 10

+Opportunity cost is the value of the best alternative you give up when making a choice. It’s about what you could have gained by choosing a different option. For example, you have free time on a Saturday and you have to decide between going to the movies or going for a hike. If you choose to go to the movies, the opportunity cost would be the enjoyment and exercise you could have had from going for a hike instead. On the other hand, if you choose to go for a hike, the opportunity cost would be the entertainment and relaxation you could have experienced by watching a movie.

Question 11

In sales mix analysis,

Answer 11

Sales Mix Break-even : Sales mix is the proportion in which two or more products are sold.
Important assumptions:
The proportion of sales mix must be predetermined
The sales mix must not change within the relevant time period

Question 12

Limiting Factor

Answer 12

The usual objective in questions is to maximise profit. Given that fixed costs are unaffected by the production decision in the short run, the approach should be to maximise the contribution earned.

Question 13

Relevant Costing:

Answer 13

is a managerial accounting term that describes avoidable costs that are incurred only when making specific business decisions. The concept of relevant cost is used to eliminate unnecessary data that could complicate the decision-making process.

Question 14

+Outlay Cost:

Answer 14

also known as explicit cost, is the actual monetary expense or payment required to acquire a product, service, or resource. For instance, if you buy a new smartphone for $500, the outlay cost is the $500 you pay to purchase the phone.

Question 15

Relevant costs and revenues

Answer 15

would include:
- The cost of raw materials and manufacturing specifically for the new product.
- The additional labor costs required to produce the new product.
- The expected revenues generated from sales of the new product.

Question 16

Non-relevant costs would include:

Answer 16

• Sunk costs: Any money already spent on market research or development for the new product, as those costs cannot be recovered and do not impact the decision going forward.
  
  • Committed costs: Fixed costs like rent or salaries that the company has to incur regardless of the decision to launch the new product.
  • Non-cash flow costs: Depreciation expenses or notional costs that don’t involve actual cash outflows.
  • General fixed overheads: Overhead costs that do not change with the decision to launch the new product.

Question 17

Opportunity cost would involve

Answer 17

Opportunity cost would involve considering the potential profits or contributions that could have been earned from alternative uses of resources. For example, if skilled labor is redirected to work on the new product, the opportunity cost would be the contribution lost from their absence in the normal production line.