Intro To Costing Systems

Question 1

What is a direct cost

Answer 1

It is traceable to individual units of production

Question 2

What is an indirect cost

Answer 2

Shared over many units often described as overheads, eg lubrication for machines

Question 3

What is production costs

Answer 3

Costs that are incurred in the factory building eg raw materials, staff wages or rent

Question 4

What are non production costs

Answer 4

They are incurred else where in the organisation, these costs can be broken down into further categories
Administrative expenses - purchase of stationery
Selling and distribution - encourage customers to buy, advertising, rent of warehouse, wages of delivery drivers
Finance costs - incurred by the way the business raises money such as interest charged on a bank loan

Question 5

Semi variable costs

Answer 5

A mix of a fixed element and a variable element costing eg water charges, it is fixed monthly but the variable charges for when you increase water output

Question 6

Fixed costs

Answer 6

Not affected by volume of production eg rent

Question 7

Variable costs

Answer 7

Increase in line with the volume of production

Question 8

Semi fixed costs

Answer 8

(Stepped costs) eg salaries paid to your factory supervisors and you increase the volume of production significantly the you need an additional supervisor to monitor the increase in activity, which causes salaries to go up

Question 9

Variances as %

Answer 9

Variances as % budget = variance/budget x 100

Question 10

Management or financial accounting
External use only eg bank, shareholders

Answer 10

Financial accounting

Question 11

Management or financial accounting
To record the financial performance in a period and the financial position at the end of that period

Answer 11

Financial accounting

Question 12

Management or financial accounting
No legal requirements

Answer 12

Management accounting

Question 13

Cost, revenue, profit or investment centre
Managers responsible for costs not revenue

Answer 13

Cost centre

Question 14

Cost, revenue, profit or investment centre
Managers have sales targets to reach and would be held responsible whether targets have been met

Answer 14

Revenue centre

Question 15

Cost, revenue, profit or investment centre
Responsible for costs and revenue but not investment

Answer 15

Profit centre

Question 16

Cost, revenue, profit or investment centre
Responsible for costs, revenue, and the level of investment in the division

Answer 16

Investment centre