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Cost Accounting Flashcards

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1
Q

Fixed + Variable Cost =

A

Total Cost

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2
Q

Fixed + (variable cost x units) =

A

Total Cost

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3
Q

Total Variable Costs change when

A

activity changes

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4
Q

When activity changes total fixed costs remain

A

unchanged

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5
Q

Raw materials is an example of what cost?

A

Total variable costs

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6
Q

Factory building depreciation is an example of what cost?

A

Total fixed costs as it will not change with the level of production

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7
Q

Direct Labour (wages) is an example of what cost?

A

Variable cost

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8
Q

Factory water, light and electricity is an example of what cost?

A

Variable cost

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9
Q

Sales commission is an example of what cost?

A

Variable cost

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10
Q

Delivery costs is an example of what cost?

A

Variable cost

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11
Q

Land Tax is an example of what cost?

A

Fixed cost

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12
Q

Insurance is an example of what cost?

A

Fixed cost

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13
Q

Supervisory salaries is an example of what cost?

A

Fixed cost

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14
Q

Depreciation is an example of what cost?

A

Fixed cost

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15
Q

Advertising is an example of what cost?

A

Fixed cost

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16
Q

What are the assumptions of cost behaviour? (2)

A

Relevant Range
Linearity

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17
Q

What is relevant range?

A

Level of activity over which a particular cost behaviour pattern exists

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18
Q

What is the contribution margin format?

A

Sales - VC = CM - FC = profit//loss

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19
Q

What does the contribution margin format represent?

A

Difference between sales revenue and variable expenses

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20
Q

Why is the contribution format useful? (2)

A

Useful in planning, control and evaluation processes
Emphasises cost behaviour

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21
Q

What is the contribution margin ratio?

A

Contribution Margin/Sales

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22
Q

What are the 4 questions involved in cost volume profit analysis?

A

What volume of sales is needed to cover total costs?
What sales volume must be achieved to reach a targeted profit?
If there is a change in FC or VC, what impact will that have on the sales volume needed to cover costs?
What would be the impact of a change in selling price?

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23
Q

What is the formula for CVP?

A

Sx = VCx + FC + p

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24
Q

What is break-even analysis? (2)

A

Determines the activity level required to cover all costs associated with the business
Assesses activity level required to achieve profit targets

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25
BE (Units) =
Fixed Costs / Contribution Margin per unit
26
BE ($) =
Fixed Costs / Contribution Margin Ratio BE (units) x sales price per unit
27
BE (+ desired profit) =
(FC + Desired Profit) / Contribution Margin Ratio BE + desired profit (units) x sales price per unit
28
What are the 3 weaknesses of break-even analysis?
Non-linear relationships Stepped fixed costs Multi-product businesses
29
Total Costs =
Fixed Costs + (variable rate x activity level) Direct + Indirect Costs
30
Product Costs =
Raw materials, direct labour and allocation of overhead
31
What are direct costs?
Raw Materials & Direct Labour Can be conveniently traced to a unit of product or other cost objective
32
What are indirect costs?
Cannot be easily and conveniently traced to a unit of product or other cost objective Would be incurred even if the product or activity were discontinued
33
What is product costing?
Ascribe all possible direct costs to the job and then charge each unit of output with a 'fair share' of indirect costs
34
COGS =
product cost x units sold
35
What is a manufacturing overhead?
Includes all manufacturing costs except raw material and labour
36
What type of overhead is maintenance and cleaning?
Manufacturing
37
What type of overhead is depreciation for factory buildings and equipment?
Manufacturing
38
What type of overhead is production supervision salaries?
Manufacturing
39
What are period costs?
All other costs that are not product costs Usually a lump sum for the period Almost always indirect
40
Product Costs + Period Costs =
Total Costs
41
When is the predetermined overhead application rate used?
To apply overhead to jobs before the period begins
42
POAR =
estimated total manufacturing overhead for the coming period / estimated total units in the allocation base for the coming period
43
What is actual overhead?
Actual $ spent after bills come in
44
What is budgeted overhead?
Estimated amount we think we are going to spend (used in POAR)
45
What is allocated overhead?
Amount of overhead assigned to product
46
POAR x actual quantity of cost allocation base =
Overhead
47
Cost Pool (budgeted)/ CAB (budgeted)
POAR
48
RM + DL + OH =
product cost
49
Cost-plus pricing =
product cost + mark-up
50
What is market-based pricing? (3)
Starts with a target price Estimated based on an understanding of customer perceived value for a product or services and competitors price One target price established, work backwards to get target cost
51
What short-run investment decisions?
Decisions affecting the next few days, weeks or months
52
What is a product mix decision?
Managers faced with issue of deciding how scarce resources (limiting factor) are going to be utilised Fixed costs are not affected by this decision so management can focus on maximising total contribution margin
53
Product Mix Equation
Contribution Margin / Limiting Factor Most profitable when CM / Limiting Factor is maximised
54
What is the make or buy decision? (3)
Should a company make or buy something? The production process has costs associated with it There is a cost to buy it in ready-made
55
What is relevant cost?
Avoidable cost (cost that can be avoided if we outsource)
56
We will make a product if...
Avoidable cost is less than the purchase price to buy
57
We will buy a product if...
Avoidable cost is greater than the purchase price to buy
58
If the decision is to outsource control is lost over... (3)
Quality Timing Pricing of Inputs
59
If decision is to outsource must question... (3)
What happens to our staff? Do we have use for the facilities currently in operation? Is there a cost for distribution or storage?
60
What is a special order decision?
One off order from a customer who wants X amount at X price, in addition to normal business activity
61
What components are relevant to a special order decision?
Capacity and Contribution Margin
62
A long term plan defines...
The general direction of the business over the next five years (what markets, production methods, profit, staff, financing, resources)
63
5 parts of the planning process
Identify business objectives Consider options Evaluate options and make a selection Prepare long-term plans (long-term budgets) Prepare budgets (short-term)
64
What is a sales forecast? (2)
First budget, all others uses sales forecast Based on the past
65
Sales forecast equation =
Forecasted Volume x Forecasted Price
66
What is a cash receipts budget? (2)
How much $$$ we get from customers Cash and credit sales
67
What is a cash budget? (4)
Key Budget How much $$$ Helps reflect business activities better than any other Show expected future cash receipts and cash payments
68
Inventory Flow Model
Beginning Inventory + Purchases/Production = Goods Available for Sale - Ending Inventory = COGS

BSNS115 (2 decks)

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