Cost Classifications and Behaviours

Question 1

What information does management accounting provide?

Answer 1

1) Cost
2) Selling price
3) Profit
4) Number of units made etc.

Question 2

What is a direct cost?

Answer 2

A cost we can directly trace to a particular product.

Question 3

What is an indirect cost?

Answer 3

Costs that relate to a number of phones and are hard to link to a particular phone. These are also called overheads.

Question 4

What are production costs?

Answer 4

These are costs that are incurred in taking the product from raw material to a finished product.

Question 5

What are non-production costs?

Answer 5

Occurs when the product leaves the factory e.g. warehouse costs or distribution costs.

Question 6

What is the standard cost card made of?

Answer 6

Direct materials
Direct labour
Direct expenses
Added to make prime cost
Overheads
Profit
Selling price

Question 7

What is stepped fixed cost?

Answer 7

A cost that only increases after a certain threshold.

Question 8

What is a semi-variable cost?

Answer 8

The fixed portion is normally a minimum payment and the variable element varies with production.

Question 9

What is the high-low method?

Answer 9

Find the difference between the outputs and costs. Then divide differences to get variable cost. This helps figure out components of semi-variable costs.