Cost Behaviour

Question 1

What is the acid test ratio?

Answer 1

The short-term liquidity of a business

Question 2

Revenue in 2018 is £100000 and in 2019 is £120000, the revenue growth is?

Answer 2

20%

Question 3

The revenue is £120000 and the gross profit is £6000, the gross profit margin is?

Answer 3

5%

Question 4

Cash 1000, trade receivable 1000, inventory 500, current liability 1000, the current ratio is?

Answer 4

2.5:1

Question 5

Which is a measure of profitability?

Answer 5

ROCE

Question 6

What is direct material?

Answer 6

Raw material

Question 7

What is direct labour?

Answer 7

People working on final product

Question 8

What is overhead manufacturing costs?

Answer 8

Any other cost happen inside the business

Question 9

Where do depreciation costs fit in?

Answer 9

Overhead manufacturing cost

Question 10

What is the prime cost?

Answer 10

Direct material and direct labour

Question 11

Conversion cost is?

Answer 11

Direct Labour and Overhead manufacturing cost

Question 12

What is a product’s cost?

Answer 12

Direct material, direct labour, overhead manufacturing cost

Question 13

What is the total production cost?

Answer 13

DM, DL, MOH, Marketing and Admin

Question 14

Depreciation on manufacturing equipment is?

Answer 14

MOH

Question 15

Depreciation on office equipment?

Answer 15

S&A

Question 16

The salary of the CEO goes in?

Answer 16

S&A

Question 17

Lubricants & Cleaning Supply is?

Answer 17

MOH

Question 18

Steel, plastic and tires used in making cars?

Answer 18

DM

Question 19

Wages for assembly line workers?

Answer 19

DL

Question 20

Depreciation on delivery trucks?

Answer 20

S&A

Question 21

Advertising costs?

Answer 21

S&A

Question 22

Variable costs?

Answer 22

Cost varies with level of activity

Question 23

Any direct costs are variable, is that correct or no?

Answer 23

Yes

Question 24

What is the stepped cost?

Answer 24

Expenses that are constant for a given level of activity, but increase or decrease once the threshold is crossed.

Question 25

Fixed costs are usually characterized by?

Answer 25

Units costs that decrease as activity increases

Question 26

How would 5% sales commission paid to sales personnel be classified in a manufacturing company?

Answer 26

Variable, period cost

Question 27

What are the two parts of financial accounting?

Answer 27

Financial Accounting and Financial Reporting

Question 28

What is Financial Accounting?

Answer 28

Collecting Data. Keeping Financial Records. Analysing and interpreting financial information. Accounting information is historic (it tells what already has happened).

Question 29

What is Financial Reporting?

Answer 29

Preparing financial statements in line with international rules and guidelines, so other people can read and understand them.

Question 30

What are the three Financial Statements?

Answer 30

SOPL ("Profit/Loss account"; "Statement of Profit/Loss) - prepared for the whole accounting year. SOFP (Statement of Financial position/Balance sheet) - prepared at the end of the year. SOCF (Statement of cash flows)

Question 31

What is the objective of financial statements?

Answer 31

To provide useful information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.

Question 32

Users and interest in financial statements.

Answer 32

Present investors - Capital gain, share price growths & dividends. Potential New investors - Decision to buy or not buy. Banks - ability to service the debt and pay back capital on time. Employees - Competitive wages & Job security Management - Target met for bonuses purposes & highlight weak areas for remedial action. Suppliers - Continuing business & Ability to pay credit. Customers - Good Value for money & ability to cover warranty obligations. Competitors - Ways in which to obtain a competitive advantage. Government, inc. tax authorities - Employment, tax receipts & compliance with laws and regs. Regulators/Auditors - Compliance General public - Current issues e.g. environmental impact.

Question 33

What is cost of Sales?

Answer 33

Inventory + Purchases - Closing Inventory (if there is opening and closing stock)

Question 34

What is Gross Profit?

Answer 34

Sales - Cost of Sales (COS-COGS).

Question 35

What is Net Profit?

Answer 35

Gross Profit - Other Expenses (e.g. Salary, Rent)

Question 36

How to calculate the cash balance?

Answer 36

Balance c/f = Balance b/f + total receipts - total payments

Question 37

Gross Profit Margin formula?

Answer 37

Gross profit margin = GP/Sales * 100

Question 38

Cost of Sales Formula?

Answer 38

Opening Inventories + Purchases - Closing inventories

Question 39

Net Profit?

Answer 39

Gross Profit - Other Revenue expenses