Costing

Question 1

What are the 2 main types of costing?

Answer 1

Absorption and marginal

Question 2

Does MC have anything to do with FOH in the per unit cost calc?

Answer 2

Never

Question 3

Does the AC reflect the FOH in the per unit cost calc?

Answer 3

Yes

Question 4

How is the absorption rate calculated?

Answer 4

Bud FC/ Bud Units

Question 5

What are the 4 categories production cost can be broken down into?

Answer 5

Materials
Labour
VOH
FOH

Question 6

How can the difference in P/L between MC and AC be checked?

Answer 6

AR x Change in inventory

Question 6

What is an example of VOH?

Answer 6

Supervisor costs

Question 7

Are sales the same for MC and AC?

Answer 7

Yes

Question 8

Which costing method gives a higher value of inventory?

Answer 8

AC

Question 9

How is the AR worked out using labour cost per hour?

Answer 9

Labour cost per hour/ variable labour unit cost (decimal)

Question 10

What are direct costs?

Answer 10

Materials and labour costs

Question 11

What is a stepped fixed cost?

Answer 11

Fixed up until a certain point

Question 12

What is the absorption rate always based off?

Answer 12

Budgeted info

Question 13

How is the absorbed amount calculated?

Answer 13

Actual units produced x AR

Question 14

How is prime cost worked out?

Answer 14

Materials + Labour cost per unit

Question 15

What is prime cost?

Answer 15

total of all direct costs (materials and labour)

Question 16

What is an example of a step cost?

Answer 16

Machine hire

Question 17

What would be the most suitable for monitoring and controlling the costs incurred by a freight transport organisation?

Answer 17

Cost per tonne-kilometre

Question 18

What are regarded as cost objects?

Answer 18

Operating theatre in a hospital

Branch of a high street bank

Question 19

What is the amount of overtime premium paid to production line workers would normally classed as?

Answer 19

Factory overheads

Question 20

What are wage payments for idle time of direct workers within a production department are classified as?

Answer 20

Factory overhead

Question 21

What are indirect labour costs made up of?

Answer 21

Idle time costs and overhead premiums

Question 22

What is true of direct costs?

Answer 22

• Can be traced in full to the product, service or department that is being costed
• Might be an indirect cost of a different cost object
• Expenditure on direct costs will probably vary every period.

Question 23

What’s another name for indirect costs?

Answer 23

Overheads

Question 24

What is the cumulative weighted average cost method?

Answer 24

Total costs/Total units = new cost New cost x units sold = ans

Question 25

Under FIFO, what will the inventory valuation be close to?

Answer 25

Replacement cost

Question 26

Under LIFO, what value are inventories close to?

Answer 26

Current market value

Question 27

What is a disadvantage of the weighted average method?

Answer 27

Resulting issue price is rarely an actual price that has been paid and it may be calculated to several decimal places

Question 28

What makes decision making difficult for both FIFO and LIFO?

Answer 28

Variations in prices

Question 29

Assume LIFO, raw materials rising in price, inventories constant, what happens inventories and COS?

Answer 29

Higher COS Lower inventory value

Question 30

With all average price systems where it is required to keep prices up to date, the average price must be re-calculated?

Answer 30

Each time a purchase is made

Question 31

What constitutionalises a valid reason for calculating overhead absorption rates?

Answer 31

To attribute overhead costs to cost units

Question 32

What is known as spreading common costs over cost centres on the basis of benefit received?

Answer 32

Overhead apportionment

Question 33

How would the salary of the works manager be dealt with when calculating a fixed overhead absorption rate for the factory?

Answer 33

Allocated to the factory

Question 34

How would the salary of the logistics manager be dealt with when calculating a fixed overhead absorption rate for the factory?

Answer 34

Apportioned to the factory

Question 35

What is true of the determination of the overhead absorption rates?

Answer 35

- Costs can be allocated where it is possible to identify which department caused them - Costs need to be apportioned where they are shared by more than one department. - There is no need for a single product company to allocate and apportion overheads in order to determine overhead cost per unit

Question 36

What is true regarding absorption rates?

Answer 36

- They are usually determined in advance for each period. - They are used to charge overheads to products.

Question 37

How is a budgeted capacity calculated?

Answer 37

Calculate the budgeted overheads and the overhead absorption rate

Question 38

What does activity based costing involve?

Answer 38

Tracing resource consumption and costing final outputs

Question 39

Why are JIT systems referred to as pull systems?

Answer 39

Because demand from a customer pulls products through the production process.

Question 40

What costing method is most appropriate for plumbing repairs?

Answer 40

Per job

Question 41

What costing method is most appropriate for shoe manufacturing?

Answer 41

Per batch

Question 42

Can the procedures used to calculate unit costs in manufacturing industries can equally be applied to service industries?

Answer 42

Yes

Question 43

What items used in costing batches are normally contained in a typical batch cost?

Answer 43

Actual material cost Absorbed manufacturing overheads

Question 44

Are selling costs included in costing?

Answer 44

No

Question 45

What is the calc for contribution?

Answer 45

Units x (Selling price - Variable cost)

Question 46

Can absorption costing be the same/higher/lower compared to marginal costing?

Answer 46

Yes

Question 47

If the number of units of finished goods inventory at the end of a period is greater than that at the beginning, what will marginal costing inventory result in?

Answer 47

Less operating profit than the absorption costing method

Question 48

When comparing the profits reported under marginal and absorption costing when the levels of inventories increased what happens?

Answer 48

Absorption costing profits will be higher and closing inventory valuations higher than those under marginal costing

Question 49

When comparing the profits reported under marginal and absorption costing when the levels of inventories decreased what happens?

Answer 49

Absorption costing profits will be lower and closing inventory valuations higher than those under marginal costing

Question 50

What is true regarding mark up?

Answer 50

The percentage markup with full cost plus pricing will always be smaller than the percentage mark up with marginal cost-plus pricing.

Question 51

What criteria should be fulfilled by transfer pricing?

Answer 51

- Encourage output at an organisation-wide profit-maximising level - Enable the realistic measurement of divisional profit

Question 52

What is a dual pricing system of transfer pricing?

Answer 52

The receiving division is charged with the standard variable cost of transfers made and the supplying division is credited with the market value

Question 53

What is the formula for optimum transfer price?

Answer 53

External market price - cost savings with internal transfer