TASK ONE Flashcards by Niki Rowe

Eg of external users that could use management accounting

bank

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what is the purpose of management accounting

decision making
planning
co ordinating
controlling
communicating
motivating

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what is the acronim for ACCURATE

Accurate Complete Cost-effective Relevant Authoritative Timely Easy to Use

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what types of reports may you come acroos to provide info for informed decision?

budgeted financial reports
segmented reports
variance reports
cash flow forecasts
cost cards

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what is cost accounting

usually a large part of management accounting, concerned with establishing costs

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what is cost accouting directed at

enabling management to preform the functions of planning, control and decision making

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what are traditional cost accouting roles?

determining costs of a product or service
valuing inventory of raw materials, work in progress and finished goods, and controlling inventory level
determine the cost for an accounting period
prepare budgets
determine selling price

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who makes use of cost accounting

service industries, central and local government, and accoutancy and legal practices

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is cost accounting restricted to manufacturing and operating costS?

no, also to administartion, selling and distribution and research and developement

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what is a cost object?

anything which costs can be ascertained. cost unit and cost centres are types of cost objects

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what is a cost unit?

is a unit of product or service in relation to which costs are ascertained

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what do businesses need to do to help with planning, control and decision making?

calculate a cost per unit of output

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a composite cost unit is more appropriate if a service is?

function of two variables eg how many patients are trated for how many days (patient - days)

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what is a responsibility centre?

an individual part of a business whose manager has personal responsibility for its performance

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what are the main cost centers?

cost centre, revenue centre, profit centre, investment centre

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what is a cost center

a production or service location, function, acitvity or item of equipment whose costs are identified and recorded. (part of the business costs are determiend)

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eg if cost centers for a paint manufacturer?

mixing department, packaging departmnet, administration, or marketing departments.

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what is a revenue centre?

part of the organisation that earn sales revenue, its similar to a cost center but only accountable for revenues, not costs.

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what is a profit center

part of the business for which both the costs incurred and the revenues earned are identified

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what are managers of investment centres reponsible for?

investment decisions as well as deicisons affecting cost and revenues

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what are the five key principles?

integrity, objectivity, professional competence, confidentiality, professional behaviours

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what are the threats to fundamental principals?

self - interest
, the self review
, the advocacy
the familiarity or trust
the intimidation

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what is a cost card used for?

To show the breakdown of how much one unit costs

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what can the cost card be produced for>?

one unit or a planned level of production

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what is a product cost?

a product cost is a cost that relates to the product or service being produced or provided

what is a period cost?

a cost that relates to a time period eg monthly rent, annual salaries

what is classification of cost determined by?

the type of business that is being run. eg; fuel for a taxi firm is required for the service they provide, whereas fuel for a deliver vehicle for a manufacturing company is not part of the product they produce

classification by element involves stating costs according to what cost it is..?

materials, labour, expenses

what does materials include?

raw materials for a manufacturer or alternatively the cost of goods that are to be resold in a retail organisation

what does labour consist of

basic pay and also overtime, commissions and bonuses.

what does expenses include?

electric, deprecaition and rent

what catogries are costs split into?

Production (operating costs) cost of sales Non prodcution (non operating costS) distribution administration Depreciation

what is cost of sales category

also known as production costs. this category could include; production labour, materials, supervisor salaries and factory rent.

what does distributio cateory include?

selling and distributing costs such as sales team commissiona nd delieveery costs

what does administration costs include?

head office costs, IT support and HR support

what could a direct cost include?

direct material, direct labour, direct expenses

what is the total of all direct costs known as?

the prime cost per unit

what is a direct cost?

an item that is traceable directly to the cost unit

what is an indirect cost?

a cost that cannot be indentified with anyone finsihed unit

an example of indirect unit?

indirect material, indirect labour, indirect expenses

what costs incurred as a result of running a business but cannot be indentified to an individual teddy beaR?

indirect costs, often referred to as 'overheads'

for short term budgetting, management needs to do what?

predict how costs will vary with differing levels of activity ie the number os units being produced.

to make short term budgeting and forecasting easier, costs are split into what catoery?

variable, fixed, stepped and semi variable

what are variable costs?

costs that vary with changes in level of activity. they are constant per unit of output and increase in direct proportion to activity

what are fixed costs?

in short term are not effected by changes in activity level. the total cost stays constant as activity levels change

what do fixed costs resullt in?

a decrease in the cost per unit of put put as activity levels increase.

what is stepped fixed cost?

are costs that remain fixed up to a particular level of activity but which rise to a higher level if activiy goes beyond that range

what is a semi variable cost?

those that have a fixed element and a variable element

assumptions ; any change in cost is due to?

a change in activity levels

assumptions ;costs are assumed to be?

fixed or variables, or atlest separable into these elements

assumptions ; total fixed costs remain fixed throughout?

the activity range

assumptions ; total variable costs change?

into direct proportion to volume

assumptions ; economies and diseconomies of scaled are ignored..?

to ensure that the variable cost per unit is constant

assumptions ; do effeciency and productivity change with volume?

assumptions ; what will a cost have if its direct

a variable cost behaviour

the use of cpst behaviour is to classify costs only holds in..

short term...in long term all costs are variable

when are the behavioural characteristics used?

when planning or forecasting costs at different levels of production or activity.

what are key things to remember in forecasting?

fixed costs are constant in total varibale costs are constant per unit semi-variable costs are neither constant in total nor constant per unit stepped fixed costs will be fixed in total to a certain reange, increase and then be fixed again

if a forecast includes a stepped fixed cost, then info may be what?

provided as to when the step up in cost would occue and by how much

how do you split/separate a semi-variable cost?

done by using the high- low method

changes in activity may require?

the separation of the fixed and variable element of a semi-cariable cost. the total fixed cost will remain constant as activity changes but the total variable cost will chnage in proportion to the acitivty chnages

what is it necessary to estimate if a semi variable cost is incurred?

the fixed element and the variable element of the cost for the purpose of budgeting.

what is the hgih low method?

total cost = fixed cost + (variable cost per unit x activity level)

What only holds in the short term?

The use of cost behaviour to classify cosrs

What holds in the long term,

All costs are variable

When is behavioural characteristics used

When planning or forecasting costs at different level of production or activity

Fixed costs are…

Constant in total

Variable costs are…

Constant per unit

Semi variable costs are

Neither constant in total nor constant per unit

Stepped fixed costs will…

Be fixed in total to a certain range, increase and the be fixed again

Example of cost unit

Car manufacturers will want to determine price of a each car and different components

What is prime cost in a cost card

Total of direct costs

What is a marginal cost in a cost card

Total of direct and variable costs

What is absorption in a cost card

Total production cost

TASK ONE Flashcards

(74 cards)