Module 3: Types of Product Costing Flashcards
(138 cards)
1
Q
Materials, labour costs and other expenses can be classified as _______ costs or ________ costs.
Classification by function involves classifying costs as ___________/_____________ costs, ______________ costs or ____________ and ______________ costs.
A
direct; indirect;
production/manufacturing; administration; marketing and distribution;
2
Q
The total cost of making a product or providing a service consists of the following:
- Cost of __________
- Cost of the ______ and __________ (_______ costs)
- Cost of the _____ _________ such as:
– _____ and ______
– __________ and ___ bills
– ____________
A
materials;
wages; salaries; labour;
other expenses;
rent; rates;
electricity; gas;
depreciation;
3
Q
A _______ cost is a cost that can be traced in ____ to the product, service or department.
An _______ cost, or _________ is a cost that is incurred in the course of making a product, providing a service or running a department, but which cannot be ______ in ____ to the product, service or department.
A
direct; full;
indirect; overhead; traced; full;
4
Q
- D_____ __________ costs are the costs of _________ that are known to have been used in making a product, or providing a service.
- D_____ ______ costs are the specific costs of the ______ used to make a product or provide a service. ______ _______ costs are established by measuring the time taken for a job, or the time taken in ‘direct production work’
- O_____ ______ expenses are those expenses that have been incurred in full as a direct consequence of making a product, or providing a service, or running a department.
A
- Direct material; material;
- Direct labour; labour; Direct labour;
- Other direct;
5
Q
Examples of ______ _______ include:
- __________ ______
- ________ _________
- _________ ________
A
indirect costs;
supervisors’ wages;
cleaning materials;
building insurance;
6
Q
Total cost = ______ cost + __________
A
direct; overhead;
7
Q
- ______ ________ is all ________ consumed in the manufacture of the ________ or the _________ of the service.
- ______ ________ costs are charged to the _______ as part of the ______ cost.
A
Direct material; material; product; provision;
Direct material; product; prime;
8
Q
Examples of ______ _______ are as follows:
- C________ _____, specially purchased for a particular job, order or process.
- P___-________ _____ that, for example, is transferred from department 1 to department 2. It becomes _________ _____ of department 1 and a ______ _________ cost in department 2.
- P_______ ________ ________ like cartons and boxes.
A
direct material;
component parts;
part-finished work;
finished work; direct material;
primary packing materials;
9
Q
______ _____ are all _____ paid for ______, either as basic hours or as overtime, expended on work on the product itself.
A
Direct wages; wages; labour;
10
Q
______ _____ costs are charged to the ________ as part of the ______ cost. ______ costs are the total of all ______ costs.
A
Direct wages; product; prime; Prime; direct;
11
Q
Examples of groups of labour receiving payment as _____ _____ are as follows:
- Workers engaged in _______ the condition or composition of a product.
- Inspectors, analysts and testers _________ _______ for such production.
- Supervisors, shop clerks and anyone else whose wages are __________ _________ as working on a ________ _______.
A
direct wages;
altering;
specifically required;
specifically identified; particular product;
12
Q
As production becomes more ______-________:
- The ratio of ______ _______ costs to total _______ cost falls as the use of machinery __________, and hence depreciation charges ________.
- The ______ ______ costs and ___-_________ costs ________ as ______ _______ costs ________.
A
capital-intensive;
direct labour; product; increases;
skilled labour; sub-contractor; increase; direct labour; decrease;
13
Q
______ ________ are any _________ which are incurred on a specific product other than direct material cost and direct labour.
_______ ________ are charged to the _______ as part of the ______ cost. Examples of ______ ________ are as follows:
- The ____ of _____ or __________ for a particular job
- The ___________ costs of tools, fixtures and so on.
_______ ________ are also referred to as __________ expenses.
A
direct expenses; expenses;
direct expenses; product; prime; direct expenses;
hire; tools; equipment;
maintenance;
direct expenses; chargeable;
14
Q
P________ (or _______) _________ includes all _______ ________ costs, _______ wages and ________ expenses incurred in the factory to facilitate order completion.
A
Production; factory; overhead; indirect material; indirect; indirect;
15
Q
P_________ ________ includes the following:
- I_______ m_______ that cannot be traced to the finished product eg. Consumable stores (eg. material used in negligible amounts)
- I________ w_____, meaning all ______ not charged directly to a product eg. ______ of personnel in the production department not directly involved in the manufacture of a product (eg. supervisors)
- I_______ e________, other than _______ and ______, not charged directly to production eg:
– ____, ______ and _________ of a factory
– __________, fuel, power, maintenance of plant, machinery and buildings.
A
production overhead;
indirect materials;
indirect wages; wages; wages;
indirect expenses; materials; labour;
rent, rates; insurance;
depreciation;
16
Q
A__________ _________ is all _______ ________ costs, ______ and ________ incurred in the ________, ______ and ___________ of a business.
A
Administration overhead;
indirect material; wages; expenses;
direction; control; administration;
17
Q
Examples of administration overhead include:
- ___________ of office buildings and equipment
- ______ ________, including ________ of directors, support staff and accountants
- ______, ________ and _________ charges
A
depreciation; office salaries; salaries;
lighting, cleaning; telephone;
18
Q
M________ o_________ is all ________ _________ costs, wages and expenses incurred in promoting products and services and retaining customers.
A
- Marketing overhead;
- indirect material;
19
Q
Examples of marketing overhead include:
- _______ and ________, such as catalogues and price lists
- ________ and _________ of sales representatives and sales department staff
- _________, _____ _________ and market research
- ____, _____ and _________ of sales offices and showrooms
A
printing; stationery;
salaries; commission;
advertising; sales promotion;
rent, rates; insurance;
20
Q
D_______ o_________ is all _______ _________ costs, wages and expenses incurred in making the packed product ready for despatch and delivering it to the customer.
A
Distribution overhead; indirect material;
21
Q
Examples of distribution overhead include:
- Cost of _______ ______
- Wages of ______, ______ and _______ clerks
- _________ charges, _____, ______
A
packing cases;
packers, drivers; despatch;
insurance; rent; rates;
22
Q
C__________ by _______ involves classifying costs as __________/____________ costs, ___________ costs or _________ and ___________ costs.
A
Classification; function; production/manufacturing; administration; marketing; distribution;
23
Q
- ___________ or ___________ costs are costs associated with the ________.
- ___________ costs are costs associated with ________ office ___________.
- __________ and ____________ costs are costs associated with ______, __________, warehousing and transport departments
A
Production; manufacturing; factory;
administration; general; departments;
marketing; distribution; sales; marketing;
24
Q
P_________ costs
D______ m_________ = A
D______ w______ = B
D______ e________ = C
P______ cost = A + B + C
P__________ o_________ = D
F____ F_______ cost = A + B + C + D
A___________ costs = E
D___________ costs = F
F____ cost of ______ = A + B + C + D + E + F
A
Production;
Direct materials;
Direct wages;
Direct expenses;
Prime;
Production overhead;
Full Factory;
Administration;
Distribution;
Full; sales;
25
F_________ costs include the following:
- P__________ costs
- A__________ costs
- M_________ costs
- D__________ costs
- R________ costs
- F________ costs
Functional;
Production;
Administration;
Marketing;
Distribution;
Research;
Financing;
26
_________ costs are the costs of _________ for new or improved products, whereas ___________ costs are the costs incurred between the decision to _______ a new or improved product and the _____________ of full manufacture of the product.
Research; searching; development; produce; commencement;
27
___________ is the cost incurred in the course of making a _______, providing a _________, or __________ a department, but which cannot be _______ directly and in _____ to the product, service or department.
Overhead; product; service; running; traced; full;
28
O________ is the total of the following:
- I_______ __________
- I________ _______
- I________ _________
Overhead;
Indirect materials;
Indirect labour;
Indirect expenses;
29
The total of these _______ costs is usually split into the following categories:
- ___________
- __________ and ___________
- ____________
In cost accounting there are two schools of thought as to the correct method of dealing with overheads:
- __________ costing
- ________ costing
indirect;
production;
marketing; distribution;
administration;
absorption;
marginal;
30
A_________ costing is a method for ________ __________ between different _________ on a _____ basis.
Absorption; sharing overheads; products; fair;
31
The main reasons for using __________ costing are for:
- _________ ___________
- ________ __________
- __________ the ___________ of different _________
absorption;
inventory valuations;
pricing decisions;
establishing; profitability; products;
32
Cost of Goods _____ = Cost of goods _________ + Value of _________ inventories - Value of ________ inventories
sold; produced; opening; closing;
33
Inventory on hand must be valued for two reasons:
- For the _______ _________ figure in the __________ of _________ _______.
- For the _____ of ______ figure in the _________ of _________ ______.
closing inventory; statement; financial position;
cost; sales; statement; comprehensive income;
34
__________ ______ is recommended in __________ ___________ by IAS _ ___________.
IAS _ deals with ________ __________ systems.
Absorption costing; financial accounting; 2 Inventories;
2; financial accounting;
35
IAS 2 states that ____ of ___ _________ should comprise those costs which have been incurred in the normal course of ________ in bringing the ___________ to their '_______ _________ and _________'.
- These costs incurred will include all related __________ _________, even though these _________ may accrue on a time basis.
- In other words, in ___________ ___________, closing inventories should be valued at ____ _________ cost.
cost; all inventories; business; inventories; 'present location; condition';
production overheads; overheads;
financial accounting; full factory;
36
The three stages of absorption costing are:
- __________
- __________
- __________
allocation; absorption; apportionment;
37
A_________ is the process by which whole cost items are charged _______ to a _______ unit or _____ centre.
Allocation; direct; product; cost;
38
Cost centres may be one of the following types:
- A p_________ _____________
- A s_______ _____________
- An a__________ _____________
- A m_________ or d___________ ____________
- An o_________ cost ______
production department;
service department;
administrative department;
marketing; distribution department;
overhead; centre;
39
Stages of cost apportionment:
1) A________ g_______ o_________
2) A________ s_______ d________ costs
apportion general overheads;
apportion service department;
40
Overhead = Rent, rates, heating and lighting, repairs and depreciation of buildings
Basis --> _______ ____ occupied by each __________ (cost centre)
Floor area; department;
41
Overhead = Depreciation of equipment, insurance of equipment
Basis --> _____ or _____ value of equipment held by a particular __________ / cost centre
Cost; book; department;
42
Overhead = Personnel costs, cafeteria costs, superannuation
Basis --> ________ of _________, or _______ hours worked in each _____ ______.
Number; employees; labour; cost centre;
43
Apportioning service department costs
Our aim is to apportion all the ________ department costs to the ___________ departments, in one of three ways:
- the ________ method
- the ____-____ method
- The _________ _________ (or _________ ) method
service; production;
direct;
step-down;
repeated distribution; reciprocal;
44
Whichever method is used to apportion service cost centre costs, the _____ of ____________ must be ____
basis; apportionment; fair;
45
O________ a_________ is the process whereby __________ costs allocated and apportioned to ____________ cost centres are added to ____, ___ or _____ costs.
O_________ a_________ is sometimes called __________ _________
Overhead absorption; overhead; production; unit; job; batch;
Overhead absorption; overhead recovery;
46
After allocating and/or apportioning all overheads, the next stage in the costing treatment of overheads is to ___ them to, or _____ them into the ____ of the ________.
__________ are usually added to the cost of the product using a ___________ _________ ___________ ____, which is calculated using figures from the budget.
add; absorb; cost; product;
Overheads; predetermined overhead absorption rate;
47
- The ____________ is one of the main _________ of ____________ costing.
- If ___________ costing is to be used, because of its other virtues, then it is important that the methods used are kept under _______ ______ where necessary.
- C_______ in _________ conditions should lead to changes in the way in which _____ is __________ for.
arbitrariness; criticisms; absorption;
absorption; regular review;
Changes; working; work; accounted;
48
Many factories use a ______ ______ ____ _____ or _______ ____ ____ in preference to a rate based on percentage of ______ ________ cost, _______ or _______ cost.
direct labour hour rate; machine hour rate; direct materials; wages; prime;
49
- A _____ ______ ____ basis is most appropriate in a ______ ________ environment.
- A _______ ____ rate would be used in departments where ___________ is controlled or dictated by _________.
- A _____ ___ ____ of product would be effective only if all units were identical.
direct labour hour; labour intensive;
machine hour; production; machines;
rate per unit;
50
A ______ _________ _________ rate is a single __________ rate, that is used throughout a factory.
blanket overhead absorption;
absorption;
51
B______ _________ rates are not appropriate in the following circumstances:
- ________ or ___ pass through more than one __________, and
- ________/____ do not spend an equal amount of ____ in each ___________
Blanket overhead;
Products; jobs; department;
Products/jobs; time; department;
52
If a _______ __________ rate is used for each ___________, charging of _________ will be more ____ and the ____ cost of ___________ of items will more closely represent the amount of the ______ and _________ used to make them.
separate absorption; department; overheads; fair; full; production; effort; resources;
53
M_______ cost is the _________ cost of one unit of _______ or _______.
Marginal; variable; product; service;
54
- M________ costing is an alternative method of costing to ___________ costing.
- In _________ costing, only ________ costs are charged as a cost of ____ and a ____________ is calculated ( ______ revenue - _________ cost of ______ ).
- C_______ i_________ of ____ in ________ or finished goods are valued at _________ ( _________ ) production cost.
- F______ costs are treated as a ______ cost, and are charged in full to the __________ of _______ or _____ in the accounting period in which they are incurred.
Marginal; absorption; marginal; variable; sale; contribution; sales; variable; sales;
Closing inventories; work; progress; marginal; variable;
Fixed; period; statement; profit; loss;
55
The _______ ____________ cost per unit of an item usually consists of the following:
- _______ __________
- _________ ___________ overheads
- ______ _______
marginal production;
direct materials;
variable production;
direct labour;
56
The ________ cost of _____ usually consists of the ________ cost of __________ adjusted for __________ movements plus the _________ __________ costs, which would include items such as sales _________, and possibly some _________ __________ costs.
marginal; sales;
marginal; production; inventory; variable marketing; commission; variable distribution;
57
C_________ is of fundamental importance in ________ costing, and the term '__________' is really short for '__________ towards covering _____ _________ and making a ______'
Contribution; marginal; contribution; contribution; fixed overheads; profit;
58
- P_____ ______ costs are the same, for any ________ of ______ or __________.
Period fixed;
volume; sales; production;
59
- In _________ costing, ______ __________ costs are treated as _______ costs and are written off as they are incurred.
- In __________ costing, ______ __________ costs are ________ into the cost of units and are partially carried forward in ________ to be charged against _____ for the next period.
- I________ ______ using _________ costing are _______ than those calculated using _______ costing.
marginal; fixed production; period;
absorption; fixed production; absorbed; inventory; sales;
Inventory values; absorption; greater; marginal;
60
Using _______ costing, the _________ of _______ _________ is the _________ __________ cost (direct materials, direct labour, direct expenses) because these are the only costs properly attributable to the product.
marginal; valuation; closing inventories; variable production;
61
The principles of ________ ________ are:
- P_____ ______ costs are the _____, for any ________ of _____ or __________.
- P____ m__________ can be based on an analysis of _____ __________.
- When a ____ of _______ is made, the extra costs incurred in its manufacture are the ________ ____________ costs. F_____ costs are _________, and no extra ______ costs are incurred when ______ is _________.
marginal costing;
period fixed; same; volume; sales; production;
profit measurement; total contribution;
unit; product; variable production; fixed; unaffected; fixed; output; increased;
62
- If total contribution _______ fixed costs, a profit is made.
- If total contribution _______ ______ fixed costs, no profit or loss is made.
- If total contribution is _____ _____ fixed costs, there will be a loss.
exceeds;
exactly equals;
less than;
63
The main advantage of ___________ information, rather than _____ information, is that it allows an easy calculation of profit if sales ________ or _________ from a certain level.
C__________ information is also more useful for ________ _______ than ______ information.
contribution; profit; increase; decrease;
Contribution; decision making; profit;
64
________ costing as a cost accounting system is significantly different from ___________ costing.
It is an ___________ ______ of accounting for costs and profit, which rejects the principles of __________ ______ __________ into unit costs.
Marginal; absorption;
alternative method; absorbing fixed overheads;
65
Marginal costing characteristics:
- C_______ __________ are valued at _______ _________ cost.
- F_____ costs are _______ costs.
- C____ of ____ does not include a share of ______ _________.
Closing inventories; marginal production;
Fixed; period;
Cost; sales; fixed; overheads;
66
Absorption costing characteristics:
- C______ _________ are valued at ____ _________ cost
- F_____ costs are _________ into _____ costs.
- C____ of ______ does include a share of _______ _________
Closing inventories; full production;
Fixed; absorbed; unit;
Cost; sales; fixed overheads;
67
In ________ costing, it is necessary to identify the following:
- _________ costs
- _____ costs
- _____________
marginal;
variable;
fixed;
contribution;
68
In __________ costing (sometimes known as ____ costing), it is not necessary to distinguish _________ costs from _____ costs.
absorption; full; variable; fixed;
69
Steps in determining marginal or absorption costing profit:
1) Calculate __________ ___________ rate per ____:
O________ ___________ rate = ( __________ _______ ________ ) / ( _________ _____ )
2) Calculate total ____ per ____
3) Calculate _______ ________ in units
4) Calculate ______ / ____ absorption of __________
5) Produce __________ of _______ or ____
overhead absorption; unit;
Overhead absorption; budgeted fixed overheads; budgeted units;
cost; unit;
closing inventory;
under / over; overheads;
statement; profit; loss;
70
A company makes a single product. Its budgeted data for the period is:
Opening inventory = 3 000 units
Variable production cost per unit of opening inventory = $6
Production = 16 000 units
Sales = 17 000 units
Var. production cost per unit produced in that period = $7
Variable selling cost per unit = $1
Sales price per unit = $20
Production fixed costs = $80 000
Other fixed overhead costs = $60k
The company uses marginal costing, but is considering whether to use absorption costing instead. If absorption costing were to be used, the fixed production overhead in the opening inventory would have been $4 per unit. Inventory is valued using the FIFO method.
(a) Using marginal costing principles, what is the budgeted profit for the period?
- Opening ________ = 3k * $6 = $18k
- ____ __________ costs = 16k * $7 = $112k
= $130k
________ __________ = 2k*$7 =($14k)
____ ________ cost of _____ = $116k
________ ______ costs = 17k*$1 = $17k
Total _______ costs = $133k
______ = $20 * 17k = $340k
___________ = $207k
_______ costs = $80k+$60k= $140k
Profit = $67k
inventories;
variable production;
closing inventories;
variable production; sales;
variable selling;
variable;
sales;
contribution;
fixed;
71
(b) If absorption costing were to be used instead of marginal costing, by how much would the reported profit for the period be higher or lower?
Absorption costing per unit = F____ p________ cost / units __________ = $80k / 16k = $5
Therefore, value of _______ inventory (per unit) = $7 + $5 = $12
Using _______ costing:
- _______ ________ = 3k * $6 = $18k
- _______ ________ = 2k * $7 = $14k
__________ in _________ = $4k
Using __________ costing:
- _________ inventory = 3k * ($6+$4) = $30k
- ________ inventory = 2k * $12 = $24k
_________ in ________ = $6k
The ________ in _________ is ______ to cost of _____; therefore with __________ costing the cost of ______ in the period would be $2000 ______, and reported ______ would be $2000 ______.
fixed production; produced;
closing;
marginal; opening inventory; closing inventory;
reduction; inventory;
absorption;
opening; closing;
reduction; inventory;
reduction; inventory; added; sales; absorption; sales; higher; profit; lower;
72
Using a _________ __________ ____ offers the administrative convenience of being able to record ____ ___________ costs sooner.
Using a __________ __________ ____ avoids fluctuations in unit costs caused by abnormally _____ or ___ __________ ___________ or activity levels.
predetermined absorption rate;
full production;
predetermined absorption rate;
high; low; overhead expenditure;
73
T__________ costing systems assume that all _________ consume all ________ in proportion to their ___________ volumes.
- The use of a ___________ _________ __________ ____ tends to allocate too _____ a proportion of overheads to ____-______ products; and
- Too _____ a proportion of overheads to ___ ______ products.
A_______ B______ C______ attempts to overcome this problem.
Traditional; products; resources; production;
predetermined overhead absorption rate; great; high-volume;
small; low volume;
Activity Based Costing
74
The traditional system of _________ costing was developed when:
- cost accounting systems were used mainly for ___________ ____________ that produced only a ________ range of _________; and
- when overhead costs were only a very _____ ________ of _____ costs.
Nowadays, with the advent of a__________ m__________ t__________ (AMT), production overheads are a much more significant proportion of _____ ___________ costs.
absorption; manufacturing organisations; narrow; products; small fraction; total;
advanced manufacturing technology; total production;
75
Many _______ are used in ________ activities that are not _________ __________ to production (or selling) volume.
They include costs such as :
- Setting up __________ runs
- ___________ scheduling
- c_________ _______ handling
- i__________
- d___ p____________
resources; support; directly related;
production;
production;
customer order;
inspection;
data processing;
76
Support activities assist the efficient manufacture of products and are not, generally, affected by _______ in ___________ ________.
They tend to ____ in the ____ ____ according to the ______ and __________ of the products manufactured, rather than the volume of output.
changes; production volume;
vary; long term;
range; complexity;
77
A_______ B_____ C______ is an approach to the ______ and __________ of activities and the _______ of final outputs which involves tracing an activity's _________ consumption.
Activity Based Costing;
costing; manufacture; costing; resource;
78
Major ideas behind activity based costing:
- ________ cause an organisation to consume resources and incur costs.
- ________ are seen as driving the need for _________ and are known as ________ drivers.
- Making and selling ______/_______ is what creates _______ for the various _________.
- The _____ of all _________ used in an activity are collected into an _________ ____ _____.
- The organisation needs to ascertain the causes of the costs behind each activity - known as ____ _______.
- Using the ____ ______, the costs of each ________ are then assigned to the ____ _______.
Activities; activities; resources; resource;
products/services;
demand; products;
costs; resources; activity cost pool;
cost drivers;
cost drivers; activity; cost objects;
79
A ________ ______ is an activity that causes an organisation to consume resources and incur costs;
resource driver;
80
A ____ ______ is a factor influencing the level of cost.
cost driver;
81
An _______ ____ ____ is a grouping of costs relating to a particular activity in an ABC system.
activity cost pool;
82
An ABC system operates as follows:
Step 1) Identify an organisation's _____ _________
Step 2) Identify the factors which determine the ____ of the _____ of an ________/cause the incurrence of costs of an activity. These are known as ____ _______.
Step 3) Collect the costs of the _________ associated with each activity into what are known as _________ cost _____.
Step 4) C______ the costs of each cost pool to ________ on the basis of their usage of the activity, measured by the number of the activity's ____ _______ a product generates, using a _____ _______ rate.
major activities;
size; costs; activity; cost drivers;
resources; activity; pools;
Charge; products; cost driver; cost driver;
83
A cost driver is any factor which causes a _______ in the _____ of an ________.
change; cost; activity;
84
An organisation has estimated that the resources incurred in the production set-up activity will cost $200k for a particular period. The machinery for production has to be set-up each time a batch of a particular product is manufactured and there are expected to be 40 machine set-ups in total. In the period the company expects to manufacture 150k units of X ( in batches of 5000 units) and 500k units of Y (in batches of 50 000 units).
Calculate the production setup costs to be assigned to a single unit of X and Y, using ABC.
____ _______ rate = activity cost pool / cost-driver = $200k / 40 = $5000 per machine setup.
Total number of ________ (X) = 150k / 5k = 30
Total number of ________ (Y) = 500k/50k = 10
Total _________ ___-__ costs assigned to product (X) = ________ of _________ ___-___ (X) * ____ ______ rate = 30 * $5000 = $150k
Total ________ ___-__ costs assigned to product (Y) = _______ of ________ ___-___ (Y) * ____ ________ rate = 10 * $5000 = $50k
P_________ ___-__ cost per unit of ________ (X) = $150k / 150k = $1.00
P_________ ___-__ cost per unit of ________ (Y) = $50k / 500k = $0.10
cost driver;
batches; batches;
machine set-up; number; machine set-ups; cost driver;
machine set-up; number; machine set-ups; cost driver;
Production set-up; product;
Production set-up; product;
85
The principle difference between _________ costing and _ _ _ is the way in which ________ are _________ into products.
absorption; ABC; overheads; absorbed;
86
Using _________ costing, __________ are typically charged to products using either _____ hours or _______ hours.
ABC uses _________ ____ drivers to _______ costs and by considering each activity separately, attempts to more closely link the _________ rate to the actual cause of the ___________.
absorption; overheads; labour; machine;
multiple cost; absorb; absorption; overhead;
87
_ _ _ establishes ________ ____ ____ for _______ ________ such as despatching.
As the costs of these activities are assigned directly to ________ through cost driver rates, _______________ of _______ __________ costs is avoided.
ABC; separate cost pools; support activities;
products; reapportionment; service department;
88
A_________ ______ most commonly uses ___ absorption bases:
- _______ hours and/or
- ________ hours
To charge __________ to ________.
Absorption costing; two; labour; machine; overheads; products;
89
The main ________ of using _______ costing to provide decision making information is that ________ costing analyses ____ __________ patterns according to the _________ of __________.
However, although certain costs may be ______ in relation to the ________ of __________, they may in fact be ________ in ________ to some other ____ _______.
criticism; marginal; marginal; cost behaviour; volume; production;
fixed; volume; production; variable; relation; cost driver;
90
The advantage of _ _ _ is that it _______ costs across _________ according to a _______ of __________ bases.
ABC; spreads; products; number; different;
91
__________ costing may provide _________ decision making information, particularly in a situation where ______ costs are very _______ compared with _________ costs.
Marginal; incorrect; fixed; large; variable;
92
_ _ _ should only be introduced if the _________ ____________ it provides will result in action that will ________ the organisation's overall ____________.
ABC; additional information; increase; profitability;
93
ABC identifies four levels of activities:
- P_______ level
- B_____ level
- P______-_________ level
- F_______-_________ level
Product; Batch; Product-sustaining; Facility-sustaining;
94
Product level activities
Costs are dependent on: _________ of ___________
Examples: ________ ______
volume; production;
machine power;
95
Batch level activities
Costs are dependent on: ________ of ________
Examples: ___-__ costs
number; batches; set-up;
96
Product-sustaining activities
Costs are dependent on: _________ of a ______ group/line
Examples: _______ ____________
Existence; product;
Product management;
97
Facility-sustaining activities
Costs are dependent on: _____________ simply being in __________
Examples: ____ and _____
organisation; business;
rent; rates;
98
- If most ________ are related to ____ level and ________ level activities, the unit ________ costs generated by each method will be ________.
- If the __________ tend to be associated with _______ or _______ level activities, the unit _______ cost generated by _ _ _ will be significantly _________ from traditional __________ costing.
overheads; unit; facility; product; similar;
overheads; batch; product; product; ABC; different; absorption;
99
In the m______ m__________ e_________, production often takes place in ______, __________ production runs and a high proportion of _______ costs are incurred at the ______ stage.
An ___________ proportion of _________ costs are therefore incurred at ______ or ________ level.
Such an analysis of costs gives management an indication of the ________ level at which costs can be __________.
modern manufacturing environment; short; discontinuous; overhead; design;
increasing; overhead; batch; product;
decision; influenced;
100
Unit level activities
Examples:
- A______ _____
- Processing of ____ by ____
Possible cost drivers:
- Number of ___________
- Number of ___________
Accept cash; cash; bank; transactions; transactions;
101
Batch level activities
Examples:
- C___ ____ closed by _____ and reviewed by _________
- D______
- R______ and ______ of funds
Possible cost drivers:
- Number of ______ _____
- Number of _______
- Number of ________
Cash desk; clerk; supervisor;
Deposits;
Review; transfer;
close outs;
deposits;
accounts;
102
Product level activities
Examples:
- M__________ charges for ____ accounts
- R__________ _____ accounts
Possible cost drivers:
- Number of ________
- Number of ________
Maintenance; bank;
Reconciling bank;
transactions;
transactions;
103
Advantages of ABC
- ABC recognises the _________ of ____________ with its multiple ____ _________
- ABC facilitates a good understanding of what drives __________ costs.
- ABC is concerned with all _________ costs and so it takes management accounting beyond its traditional factory floor ____________.
- The level of ____ can be __________.
- ABC can help with ____ ___________
- ABC can be used in conjunction with ________ _____________ _______ to determine more accurately the profit earned by servicing particular customers.
complexity; manufacturing; cost drivers;
overhead;
overhead; boundaries;
cost; controlled;
cost management;
customer profitability analysis;
104
C________ p___________ a________ is the analysis of the _________ _______ and ________ costs associated with ___________ customers or customer ________.
Customer profitability analysis;
revenue streams; service; specific; groups;
105
Disadvantages of ABC:
- Arguable that a single ____ ______ may not explain the _____ _________ of all items in its associated pool.
- The number of ____ ______ and ____ _______ cannot be too excessive otherwise an ABC system would be too ______ and too __________.
- Unless costs are caused by an activity that is measurable in ___________ terms and which can be related to _____________ output, cost drivers will not be usable.
- The ____ of ABC may outweigh the ________.
cost driver; cost behaviour;
cost pools; cos drivers; complex; expensive;
quantitative; production;
cost; benefits;
106
Other uses of ABC
- P________: A_____ B______ B__________ (_ _ _) The information database produced can be used as a _____ for _________ __________.
- C_______: It is possible to ______ or ________ the _____ by managing the _________ which underlie them by monitoring ____ _______ usage.
- D_______ m_______
Planning; Activity Based Budgeting (ABB); basis; forward planning;
Control; control; manage; costs; activities; cost driver;
Decision making;
107
P______ _______ is used where there is a ___________ flow of identical units and it is common to identify it with ____________ ____________ such as the following:
- o__ __________
- the ____________ of ____
- _____ and ________ manufacture
- ___________ printing
Process costing; continuous; continuous production;
oil refining;
manufacture; soap;
food; drink;
magazine;
108
P______ ______ is a cost accounting system used where ________ or ________ are mass produced in a ___________ ____ of __________.
Process costing; products; services; continuous flow; production;
109
Features of process costing:
- There will usually be _______ ____ in ________ which must be _______.
- Production in progress is an _____________ ____________ ____.
- There is often a ____ in _______ due to spoilage, waste, evaporation and so on.
- Output from production may be a ______ product, but there may also be a __-______ and/or _____ _______.
- Costs are __________ by ___________ instead of by job, with ________ cost per ____ calculated by ( ______ _____ ) / (_______ of units _________)
closing work; process; valued;
indistinguishable homogeneous mass;
loss; process; single; by-product; join product;
accumulated; department; average; unit; total costs; number; produced;
110
With regards to ___ _______, the work relating to a ___ is usually carried out within a factory or workshop and moves through processes and operations as a ___________ __________ ____.
job costing; job; continuously identifiable unit;
111
A ___ is a customer order or task of relatively _____ duration.
It can be an __________ ______, a ______ unique _____ of _______, a ________, a _____ or even a _______ _______.
job; short;
individual project; small; batch; products; project; case; client project;
112
___ ________ is a form of specific order costing where ____ are attributed to individual ____.
Job costing; costs; jobs;
113
A ______ account has ___ sides (______ and ______) and on each side there are ___ _______ - one for __________ (of raw materials, work in process and finished goods) and one for _____.
process; two; debit; credit; two columns; quantities; costs;
114
PROCESS ACCOUNTS
On the ____ ____ side of the ______ ________ we record the ______ to the process and the ____ of these ______.
So we might show the ________ of ________ _____ to a process during the period and its ____, the cost of _______, and the cost of _________.
left hand; process account; inputs; cost; inputs;
quantity; material input; cost; labour; overheads;
115
On the _____ ____ side of the ______ _______ we record what ________ to the ______ by the ____ of the _______.
- Some of the ______ might be converted into ________ _____, so we show the units of ________ _____ and the cost of these _____.
- Some of the material input might evaporate or get spilled or damaged, so there would be _______. So we record the ____ units and the ____ of the ____.
- Some units of ______ might be in the process of being turned into _________ units and so would be _____ in ________ (_ _ _). We record the _ _ _ and the _____ of these units.
-
right hand; process account; happens; inputs; end; period;
input; finished goods; finished goods; units;
losses; loss; cost; loss;
input; finished; work; process; WIP; WIP; cost;
116
When using _______ costing, if a ______ of _________ processes is needed to ____________ the _______ product, the ______ of ___ process becomes the ______ to the ____ until the ______ output is made in the ______ process.
process; series; separate; manufacture; finished; output; one; input; next; final; final;
117
In ______ ______, in some cases, the figures for ______ ______ and ___________ ________ may not be given separately in an assessment question, but instead grouped together as one figure called '__________ ____'
process costing; direct labour; production overhead; conversion cost;
118
Framework for dealing with process costing (4-step approach)
Step 1) Determine ______ and ______
Step 2) Calculate ____ per ____ of _______, ______ and _ _ _
Step 3) Calculate ______ ____ of ______, _______ and _ _ _
Step 4) Complete _______
output; losses;
cost; unit; output; losses; WIP;
total cost; output; losses; WIP;
accounts;
119
By-Product: An _____ _______ from a ________ with an __________ ______.
extra product; process; insignificant value;
120
Joint-Product: When ___ or more ________ are ________ by the _____ _______.
two; products; produced; same process;
121
The _______ loss is the ________ ____, allowed for in the _______, and normally calculated as a _________ of the _____ ______, from a process during a period of time.
normal; expected loss; budget; percentage; good output;
122
N______ losses are generally either valued at _____ or at their ________ value (_____ value)
Normal; zero; disposal; scrap;
123
In an _________ ____ account:
- The _____ entry shows the units (and their value) from the _______ account.
- The _____ entry shows the _______ on the ________ of _____ or _____.
abnormal loss;
debit; process;
credit; impact; statement; profit; loss;
124
S____ is _________ _________ having some value
Revenue from _____ is treated not as an ________ to _____ _________, but as a _________ in _____.
Scrap; discarded material;
scrap; addition; sales revenue; reduction; costs;
125
The _____ ______ of _______ ____ is used to _______ the ________ costs of the process with the _____ ______ of the _______ ____
DEBIT ______ ________
CREDIT _______ _______
scrap value; normal loss; reduce; material; scrap value; normal loss;
DEBIT scrap account
CREDIT process account
126
A_________ _____ and ____ never affect the cost of ____ units of __________.
The ________ _____ and _____ units carry the same _____ ____ as a _____ _____ of ___________.
Abnormal losses; gains; good; production;
abnormal loss; gain; full cost; good unit; production;
127
The _____ _____ of _________ ____ is used to _______ the ____ of __________ ____, which therefore ________ the write-off of ____ to the ___________ of _____ and ____.
DEBIT ______ ________
CREDIT _________ ____ ______
scrap value; abnormal loss;
reduce; cost; abnormal loss; reduces; cost; statement; profit; loss;
scrap account;
abnormal loss account;
128
The _________ ____ account should be ________ with the ______ ______ of the ________ _____.
DEBIT __________ _____ ______
CREDIT ______ ______
abnormal gain; debited; scrap value; abnormal gain;
abnormal gain account;
scrap account;
129
The _____ ______ of the _______ ____ only is _________ to the _______ _______.
scrap value; normal loss; credited; process account;
130
CLOSING WORK IN PROCESS AND LOSSES
- Costs should be divided between _________ ______, __________ ________ and ___________ _______/______ using _________ _____ as a basis of apportionment.
- Units of _________ _____/____ are often taken to be ____ _____ equivalent unit each, and are valued on this basis.
- A________ _____ units are an _________ to the total equivalent units produced, but _________ ____ units are ____________ in arriving at the total number of equivalent units produced.
- Units of _________ _____ are valued at _____ equivalent units (ie. they do not carry any of the process costs)
finished outputs; closing inventory; abnormal loss/gain; equivalent units;
abnormal gain/loss; one full;
Abnormal loss; addition; abnormal gain; subtracted;
normal loss; zero;
131
- ____ _______ is the costing method used where work is undertaken to _________ ______ ___________ and _____ ______ is of comparatively ______ ________.
- The usual method of fixing prices within a company involved in contracting is ____ ____ ________.
Job costing; customers' special requirements; each order; short duration;
cost plus pricing;
132
___ _______ is a form of _______ ______ _______ where costs are attributed to _________ ____.
Job costing; special order costing; individual jobs;
133
- A ________ ______ must be maintained to show the _______ of _________ ____.
- In _______ _______, these are known as ___ ____ _____ or ___ ____ ______.
- In ___________ systems, ___ ____ will be collected in ___ _______.
separate record; details; individual jobs;
manual systems; job cost cards; job cost sheets;
computerised; job costs; job accounts;
134
Advantages of cost plus pricing:
- It is relatively ______ to determine the appropriate price once _________ have been __________.
- For a one-off contract it ensures that the contractor's costs will be covered and a profit realised, hence _________ the ____ of _______ on the ________.
- It may help the _______ _____ the _____ to a ________.
- It may help _______ ______ ________
simple; overheads; allocated;
reducing; risk; losses; contract;
supplier; justify; price; customer;
promote price stability;
135
Disadvantages of cost plus pricing:
- There are no _________ to ______ _____ as a _______ is guaranteed.
- There is no _______ to tackle __________ or _______.
- It does not take into account any __________ __________ in ______ and __________ volumes of _______.
- Because overheads are apportioned in an arbitrary way, this may lead to ______ and _____ pricing.
incentives; control costs; profit;
motive; inefficiencies; waste;
significant differences; actual; estimated; activity;
under; over;
136
The total cost of job 259 is $4200.
When profit is calculated as 25% of sales, the correct selling price for the job is?
____ = 75%
______ = 25%
_______ _____ = 100%
Therefore (____% / ___% ) * $4200 = $_____
Cost;
profit;
selling price;
100; 75; 5600;
137
The total cost of job 259 is $4200.
When profit is calculated as 25% of cost, the correct selling price for the job is?
_____ = 100%
_____ = 25%
_______ _____ = 125%
Selling price = (___% / ___%) * $4200 = $______
Cost;
Profit;
Selling price;
125; 100; 5250;
138
The _____ ______ of _______ ______ within a company involved in _______ _____ is ____ _____ _______.
usual method; fixing prices; contract work; cost plus pricing;
