Understanding Management Accounting

Question 1

Unless you know the cost of something, you cannot: (3)

Answer 1

• Begin to plan the allocation of resources.
• Work out what the selling price should be.
• Decide whether or not a profit is going to be made when the product or service is sold

Question 2

What is a variable cost

Answer 2

A cost that varies in direct proportion to output

Question 3

Machine power costs would normally be included under the title of __________ ____________. This category includes any costs, other than material and labour, which vary directly with output.

Answer 3

Machine power costs would normally be included under the title of variable overheads. This category includes any costs, other than material and labour, which vary directly with output.

Question 4

Making one more unit will cause the unit variable cost to be incurred. The sum of the variable costs for a unit of production is known as the _________ _____.

Answer 4

Making one more unit will cause the unit variable cost to be incurred. The sum of the variable costs for a unit of production is known as the marginal cost.

Question 5

Variable costs increase in proportion to the _______ of an _____________.

Usually the following are assumed to be variable: (3)

Variable costs are relatively…

Answer 5

Variable costs increase in proportion to the output of an organisation.

Usually the following are assumed to be variable:

• material.
• labour.
• variable overheads (other variable expenses).

Variable costs are relatively easy to measure.

Question 6

The way to understand if a cost is fixed or variable is

Answer 6

if more cost is caused by an extra unit, the cost is variable.