Topic 1 - Costing Flashcards
1
Q
Advantages and disadvantages of LIFO
A
- inv issued at a price close to the current market value
- managers more aware of up to date costs
- each purchase needs to be recorded seperately
2
Q
Advantages and disadvantages of FIFO
A
- easy understand
- inv valuation close to the current replacement cost
- each purchase needs to be recorded seperately
- high inflation can cause cost of inventory issues to lag behind current market value
3
Q
Advantages and disadvantages of AVCO
A
- flucations in price are smoothed out
- easier to administer
- value of inventory issues rarely same as what the items cost
4
Q
Job costing and contract costing
cost per unit
A
- each job/ contract is allocated a seperate number and costs are accumulated against the number to determine the total cost of the job/contract
5
Q
Batch and process costing
cost per unit
A
- total batch/process cost divided by the number of units in the batch or produced in each period
6
Q
Advantages and disadvantages of absorption costing
A
- selling price must cover all costs
- complies with IAS 2 Inventories
- profits can be manipulated by changing production levels
- based on assumption that overheads are volume related
7
Q
Advantages and disadvantages of marginal costing
A
- highlights contribution
- profits depend on sales efficiency not production levels
- does not comply with IAS 2
- contribution may not cover fixed costs
8
Q
Cost Object
A
Something you can accumulate costs against
9
Q
Cost Unit
A
A basic measure (unit) of a product or service
10
Q
Elements of Cost
A
Things that make the finished product
