week 5 Flashcards
management accounting
profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and
implementation of an organisation’s strategy
HR
Ensure a supply of labour that is affordable
marketing
ensure products can be placed in the market at the right price
cost object
identifying cost of one unit/ product/ service
two types of cost
product cost
period cost
product costs
costs attributable to the making of products. included in the cost of a cost object e.g. direct materials
period costs
costs not attributable to the making of a product. e.g. marketing costs
why do we want to know the cost of one unit
-profitability analysis
- inventory (stock) valuation
-pricing decisions (how do we know selling at a profit)
sales price (revenue)
value we sell a cost object for
direct (variable) cost
costs exclusively relating to a cost object
direct labour
labour costs of making and assembling the cost object
variable production overhead
fluctuate roughly in proportion to cost object output. directly required to produce product. e.g. production electricity, costs of purchasing, wholesale packaging
indirect (fixed) production overheads
production costs that has been incurred that cannot be specifically traced to a cost object. e.g. cost of running factory
type of costing
absorption costing (full costing, traditional costing)
variable costing (marginal costing)
absorption costing
overhead absorption rate OAR
calculation that allows us to absorb the cost of fixed overheads into a cost object
OAR equation
production overhead cost/ total absorption basis
absorption basis
labour hours, units produced, machine hours
variable costing
all fixed overheads as treated as period cost
fixed production overheads
don’t go into the product cost, they go straight into statement of profit and losses
contribution
first level of profit under variable costing. it is money left over to contribute to fixed overheads and to make a profit
contribution equation
sales- variable costs
margin of safety
=total rev(unit)- break even / total revenue (unit). x100
