MAPS - Chapter 1 - Intro to MAPS

Question 1

What is a cost unit?

Answer 1

A unit of output to which cost can be charged

Question 2

What is a composite cost unit?

Answer 2

Units of output which comprise of two variables

Question 3

What’s a responsibility centre?

Answer 3

A segment of the business for which a manager is accountable

Question 4

What is a cost centre?

Answer 4

A segment of the business to which costs can be charged

Question 5

What are positives of cost centres?

Answer 5

Allows segmented costs which can assist with control of the business

Question 6

What is a profit centre?

Answer 6

Segments of the business to which costs can be charged, revenue identified and profit calculated

Question 7

What is a revenue centre?

Answer 7

Segments of the business where sales revenue from the product sold or service provided is measured

Question 8

What differs cost and profit centres?

Answer 8

Cost centres do not have any significant revenue

Question 9

What is an investment centre?

Answer 9

Segments of the business where profit is compared with the amount of money invested in the centre

Question 10

What do you calculate at an investment centre?

Answer 10

Return on investment (ROI)

Question 11

How do you calculate ROI?

Answer 11

(Profit/Investment) x 100

Question 12

What are the three main sections of a manufacturing business?

Answer 12

• Factory
• Warehouse
• Office

Question 13

How can costs be classified?

Answer 13

• By element
• By nature
• By function
• By behaviour

Question 14

How can cost be classified by element?

Answer 14

• Materials costs
• Labour costs
• Other expenses such as rent

Question 15

Why can classifying costs by element be beneficial?

Answer 15

Allows managers to see the breakdown into different kinds of cost

Question 16

What does classification of costs by nature mean?

Answer 16

Whether a cost is a direct cost or an indirect cost

Question 17

What is a direct cost?

Answer 17

A cost that can be identified directly with each unit of output

Question 18

What is an indirect cost?

Answer 18

All costs, other than those identified as direct costs

Question 19

What is the total of direct costs called?

Answer 19

Prime costs

Question 20

What does classification by function mean?

Answer 20

It is the costs incurred in different sectors of the business. Basically what department they relate to

Question 21

What does classification of costs by behaviours include?

Answer 21

• Fixed
• Semi-variable
• Variable
• Stepped

Question 22

How do you know which classification to use?

Answer 22

Whichever suits the business’ needs the best

Question 23

Why classify costs by element?

Answer 23

Can look for high cost elements in order to make savings

Question 24

Why classify costs by nature?

Answer 24

Looking at direct and indirect costs to o wee where savings can be made

Question 25

Why classify costs by function?

Answer 25

Look at different departments and see which are high-spending

Question 26

Why classify costs by behaviour

Answer 26

Business could make savings by altering the balance between fixed and variable costs

Question 27

What does classifying costs help management with?

Answer 27

- Decision-making - Planning - Control

Question 28

How to calculate costs?

Answer 28

- Identify units of output - Calculate units of output for particular time - Calculate direct costs - Calculate corresponding indirect costs - Calculate total cost of unit of output

Question 29

What is another name for the total cost?

Answer 29

Absorption cost

Question 30

Formula to calculate cost of a unit of output?

Answer 30

(Direct costs + indirect costs) / units of output

Question 31

What’s a total cost statement?

Answer 31

Add direct costs = Prime costs Add Production overheads = Production cost Add non-Production overheads = Total Cost

Question 32

How to calculate profit?

Answer 32

Revenue - Total Cost

Question 33

What are product costs?

Answer 33

Cost to he is a part of manufactured product, prime cost + production overheads. This is included in closing inventory

Question 34

What are period costs?

Answer 34

Costs not part of manufactured product. They are incurred over a period of time and cannot be included in closing inventory, will be in P+L