Costing

Question 1

What are the three purposes of Management accounting?

Answer 1

1. Planning-objectives and assessing future costs and budgeting
2. Control- evaluate performance. Address ineffiencies.
3. Decision making- use previous information from two others to make decisions.

Question 2

What is the definition of a cost object?

Answer 2

Anything for which cost data is desired, such as products, product lines,jobs,customers and divisions of a company.

Question 3

What is the definition of a cost card?

Answer 3

A document which groups the costs of a product or service in order to arrive at a total cost.

Question 4

What is the definition of a cost unit?

Answer 4

A unit of product or service to which costs can be attached.

Question 5

What is the definition of a cost centre?

Answer 5

A location,function or item or equipment in respect of which costs may be ascertained and related to cost units for control purposes.

Question 6

What is the definition of the high low method used to predict costs?

Answer 6

Requires several observations of costs incurred at different output levels. This data can be used to predict costs that would be incurred at other output levels.

Question 7

What are the costs associated with digital costs objects?

Answer 7

1. High fixed costs-research and development.
2. Low variable costs-
3. Ongoing development costs.
4. Security and compliance costs
5. Evolving revenue streams

Question 8

What are the four characteristics of service industries that make costing harder?

Answer 8

• Simultaneous production and consumption
• Heterogeneity of services
• Intangibility of services
• Perishable nature of services

Question 9

What are the 3 disadvantages of Absorption Costing?

Answer 9

1.) Costs are obscured
2.) Includes costs that are not useful for relevant decision making
3.) Profits can be manipulated by adjusting the volume of the profits since closing inventory will be deducted.