Ba2

Question 1

Direct Costs

Answer 1

Clearly Identified with the cost object

Question 2

Prime Cost

Answer 2

Total of all direct costs

Question 3

Indirect costs

Answer 3

cannot be directly linked to cost unit but clearly incurred in production

Question 4

fixed cost

Answer 4

cost unaffected by movement in activity

Question 5

stepped fixed cost

Answer 5

if production grows, fixed cost increases

Question 6

variable cost

Answer 6

varies with measure of activity

Question 7

semi variable cost

Answer 7

fixed costs with additional add ons

Question 8

high low method

Answer 8

find the difference between the highest and lowest activity levels and their respective costs
find variable cost per unit
multiply this by highest activity level to get total variable cost and subtract from total to get fixed

Question 9

regression analysis y=a+bx

Answer 9

y= total cost
a= fixed cost
b= variable cost per unit
x= activity level

Question 10

coefficient of determination

Answer 10

r^2 = gives the proportion of changes in y that can be explained by changes in x

Question 11

relevant costs

Answer 11

costs affected by managerial decision

Question 12

irrelevant cost

Answer 12

costs that will not change in the future when you make one decision vs another

Question 13

overheads

Answer 13

these are the same as indirect costs

Question 14

total cost per unit

Answer 14

direct costs(prime) + overheads

Question 15

production overheads

Answer 15

indirect costs incurred by the production function

Question 16

service cost centres

Answer 16

cost centres that are part of production but not directly involved

Question 17

absorption costing

Answer 17

allocation and apportionment, reapportionment and absorption of overheads

Question 18

apportioned costs

Answer 18

(total overhead cost/total value of apportionment base) x value of apportionment based off the cost centre being calculated

Question 19

reapportionment

Answer 19

ratio based of how much should be apportioned to each production centre

Question 20

absorption of overheads

Answer 20

measure the level of production achieved
work out the OAR
multiply this by hours/units used to get overhead absorbed by cost unit

Question 21

OAR

Answer 21

production cost centre overhead/ quantity of absorption base

Question 22

reciprocal servicing

Answer 22

when we need to apportion the costs of multiple service centres

Question 23

under/over absorption

Answer 23

the amount of overhead could be more/less than budgeted
the quantity of the absorption base could have been more/less than budgeted

Question 24

overheads absorbed

Answer 24

budgeted OAR x actual hours/units

Question 25

under/over absorption calc

Answer 25

amount absorbed- actual cost incurred

Question 26

marginal costing

Answer 26

the additional cost incurred in producing one additional unit of the product including total variable costs but NOT fixed overheads

Question 27

contribution

Answer 27

sales value - variable costs

Question 28

total contribution

Answer 28

contribution per unit x sales value

Question 29

profit

Answer 29

total contribution - fixed costs

Question 30

profit for absorption costing

Answer 30

opening and closing inventory are valued at full production cost and adjustment for under/over absorption of overheads is necessary

Question 31

profit of marginal costing

Answer 31

opening and closing inventory are valued at marginal production cost if there are variable non production costs these would be deducted before contribution but not included in cost of sales fixed costs actually incurred are deducted from contribution earned

Question 32

Costing affects on inventory

Answer 32

inventory levels increase- absorption gives higher profit inventory levels decrease- marginal gives higher profit

Question 33

profit mark up

Answer 33

selling price = total cost +% profit = % of total cost

Question 34

profit margin

Answer 34

selling price = total cost x (required margin/ 1- required margin) profit = total cost/ 1- required margin

Question 35

purpose of budgeting

Answer 35

planning control co ordination communication motivation performance evaluation authorisation

Question 36

what is a budget

Answer 36

a quantitive expression of a plan for a defined period of time

Question 37

levels of budgeting

Answer 37

strategic- long term budgetary- short to medium term operational- short term/ day to day

Question 38

master budget

Answer 38

contains all the departmental activity budgets comprised of a budgeted SOPL, SOFP and cash flow statement

Question 39

budget preparation steps

Answer 39

sales budget considers how many units can be sold production budget considers how many units to produce material labour and overhead budgets are established based on production budget non production budgets are considered the master budget is created

Question 40

cash budget

Answer 40

shows the cash effect of all decisions taken in the planning process can be a forewarning of potential problems prepared for each period showing deficits or surpluses

Question 41

periodic budgeting

Answer 41

costs and revenues for one period at a time

Question 42

rolling budget

Answer 42

budgets continuously updated by adding a further accounting oeriod

Question 43

incremental budgeting

Answer 43

based on the previous budget or actual, adjusting for known changes in inflation

Question 44

zero based budgeting

Answer 44

required all costs to be specifically justified by the benefits expected

Question 45

bottom up budget

Answer 45

all budget holders have the opportunity to participate in setting their own budgets

Question 46

top down budget

Answer 46

set without permitting the ultimate budget holder to have the opportunity to participate

Question 47

fixed budget

Answer 47

used for planning purposes set at the start of the period and plans expected income and expenditure

Question 48

flexible budget

Answer 48

used for control purposes prepared at the end of the budget period to determine whether or not the operations remain under control

Question 49

total cost variance equations for flexible budgets

Answer 49

original budget - fixed cost = variable cost budget cost allowance = budgeted fixed cost + (number of units produced x variable cost per unit) budget variance = flexed budget - actual cost total cost variance = (fixed budget - flexed budget) - (flexed budget - actuals)

Question 50

direct material total variance

Answer 50

what a material did cost be what it should have for x units

Question 51

direct material price variance

Answer 51

what the weight should have cost vs what it did

Question 52

direct material usage variance

Answer 52

the amount of kg used vs what was planned for x units

Question 53

direct labour cost variance

Answer 53

what labour did cost vs should have for x units

Question 54

direct labour rate variance

Answer 54

what labour should have cost vs what it did for x hours

Question 55

direct labour efficiency variance

Answer 55

how long it should have taken vs did to produced x units

Question 56

variable overhead total variance

Answer 56

what overheads should have cost vs did for x units

Question 57

variable overhead expenditure variance

Answer 57

how much variable overheads cost be should have in hours

Question 58

variable overhead efficiency variance

Answer 58

labour efficiency variance multiplied by the standard variable overhead rate per hour

Question 59

sales price variance

Answer 59

x units should sell for x$ but did sell for y$

Question 60

sales volume contribution variance

Answer 60

(actual sales(units) - budgeted sales) x standard contribution variance

Question 61

gross revenue

Answer 61

total sales achieved by the company

Question 62

sales revenue

Answer 62

gross revenue - returns

Question 63

gross profit

Answer 63

sales revenue - cost of sales/ cost of goods sold

Question 64

gross margin

Answer 64

gross profit/sales revenue x100

Question 65

operating profit

Answer 65

gross profit - all other expenses

Question 66

operating margin

Answer 66

operating profit/ sales revenue x 100

Question 67

ROCE

Answer 67

operating profit/ capital employed

Question 68

non financial performance measures

Answer 68

measurement of customer satisfaction resource utilisation measurement of quality

Question 69

batch costing

Answer 69

a group of similar units which maintains its identity throughout one or more stages of production and is treated as a cost unit

Question 70

value for money concept

Answer 70

economy- relationship between money spent and the inputs efficiency- whether the maximum output is being achieved from the resources used effectiveness- what extent the outputs generated achieve the objectives of the organisation

Question 71

relevant costs

Answer 71

materials labour overheads NCA

Question 72

break even point in units

Answer 72

fixed costs/ contribution per unit

Question 73

margin of safety in units

Answer 73

projected sales - breakeven sales

Question 74

margin of safety %

Answer 74

projected sales - breakeven sales/ projected sales

Question 75

C/S ratio

Answer 75

contribution/sales

Question 76

breakeven point in $ of sales revenue

Answer 76

fixed costs/ c/s ratio

Question 77

sales units required to achieve a profit of x

Answer 77

fixed costs + x/ contribution per unit

Question 78

sales revenue required to achieve a profit of x

Answer 78

fixed costs + x/ c/s ratio

Question 79

limiting factor

Answer 79

any factor which is in scarce supply and which limits the organisations activites

Question 80

contribution per unit of limiting factor

Answer 80

contribution per unit/ amount of limiting factor required per unit

Question 81

LF steps

Answer 81

establish LF calculate contribution per unit for each product calculate contribution per unit of LF for each product rank the products according to their contribution per unit of LF allocate the LF to the highest ranking product distribute rest going down in ranking order

Question 82

make or buy decisions

Answer 82

external= purchase cost is marginal in house= variable production costs + specific or avoidable fixed costs (+ opportunity cost if there is no spare capacity)