Flashcards
F2 Chapter 3 - Cost classification
Cards in this deck (25)
- 1Direct costA direct cost is a cost that can be traced in full to the product, service, or department that is being costed.
- 2Indirect costAn indirect is a cost that is incurred in the course of making a product, providing a service or running a department, but which cannot be traced directly and in full to the product service department.
- 3Direct Material Direct Labour Other direct expensesDirect material costs are the costs of materials that are known to have been used in making and selling a product/service
Direct labour costs are the specific costs of the workforce used to make a product or provide a service. Direct labour costs are established by measuring the time taken for a job or the time taken in direct production work
Other direct 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. - 4Direct MaterialDirect material is all material becoming part of the product (unless used in negligible amounts and/or having negligible cost).
- 5Functional CostsClassification by function involves classifying costs as production/manufacturing costs, administration costs or marketing/selling and distribution costs.
- 6Semi-fixed/Semi-variableA different way of analysing and classifying costs is into fixed costs and variable costs. Many items of expenditure are part-fixed and part-variable and hence are termed semi-fixed or semi-variable costs
- 7Fixed costsFixed cost is a cost which is incurred from a particular period of time and which within certain activity levels is unaffected by changes in the level of activity
- 8Variable CostsA variable cost is a cost which tends to vary with level of activity
- 9Production and non-production costsProduction costs are costs identified with goods produced or purchased for resale.
Non-production costs are costs deducted as expenses during the current period. - 10Cost CodesOnce costs have been classified, a coding system can be applied to make it easier to manage the cost data, both in manual systems and in computerised systems.
- 11Advantages of coding system• Code is usually briefer than a description, thereby saving clerical time in a manual system and storage in a computerised system
• A code is more precise than a description and therefore reduces amibugity
• Coding facilitates data processing. - 12Cost centresCost centres are collecting places for costs before they are further analysed. Costs are further analysed into cost units once they have been traced to cost centres
- 13Cost unitCost unit is a unit of product or service to which costs can be related. The cost unit is the basic control unit for costing purposes.
- 14Cost objectA cost object is any activity for which a separate measure of costs is desired
- 15Profit CentreProfit centres are similar to cost centres but are accountant for both costs and revenues
- 16Revenue centreRevenue centres are similar to cost centres and profit centre but are accountable for REVENUES only. Revenue centre managers should normally have control over how revenues are raised.
- 17investment centreAn investment centre is a profit centre with additional responsibilities for capital investment centre is a profit centre with additional responsibilities for capital investment and possibly for financing, and whose performance is measured by its return on investment.
- 18responsibility centreA responsibility centre is a department or organisational function whose performance is the direct responsibility of a specific manager.
- 19How could overtime premium be classedFactory Overheads
- 20Managers of profit centers have control overSelling prices and controlling costs
- 21ControllableCosts can be influenced by cost holders
- 22Period costPeriod cost is a cost that relates to a time period which is deducted as expenses for the period and is not included in inventory valuation
- 23Type of Production overheadSupervisors
- 24Cost centre =Function or location for which costs are ascentrained
- 25—
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- Flashcards on F2 Chapter 3 - Cost classification, created by D A on 08/06/2017.
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