Types Of Costing

Question 1

What is Activity Based Costing?

Answer 1

Costing that is generated by the level of activity

Question 2

What are the advantages of ABC?

Answer 2

• It makes pricing and decision making more accurate

-it allows you to react and control costs

Question 3

What are the disadvantages of ABC?

Answer 3

-ABC is more time consuming and costly
-ABC only works for businesses with a variety of products

Question 4

What is Absorption Costing?

Answer 4

When production costs are included within standard costs of an item

Question 5

What is the purpose of absorption costing?

Answer 5

-to think about cost centres and departments to estimate/apportion these to

Question 6

What are overhead costs generated by?

Answer 6

They are generated by the level of activity

Question 7

What is the difference between how ABC and Absorption costing calculate absorption rate?

Answer 7

• ABC calculates based on total number of activities
  -Absorption calculates based on labour hours

Question 8

What factors outside cost affect the price you charge?

Answer 8

-customer demand
-competitiors
-objectives/goals (e.g may wish to price low for certain time)

Question 9

What is the main differences between Conventional and Digital Costing?

Answer 9

-Conventional is cheaper than Digital Costing
-Conventional is more simpler and quicker method than Digital
-Conventional costs easy to establish whereas digital is hard to put amount on
-Conventional material costs is higher, whereas digital has no/little costs
-conventional has no maintenance costs whereas App does (needs IT experts)

Question 10

What is the main difference in overheads between Conventional and Digital?

Answer 10

-Conventional is difficult to achieve accurate overheads as absorption and apportionment subjective
-Digital costs likely to incur are functionality and data related

Question 11

What are the 3 types of Cost Identification?

Answer 11

• Timing of Costs
  -Estimating Standard Costs
  -Shared Costs