3657605
| Frage | Antworten |
| BUDGETING | Aim - To understand how internal and external influence affect a budget Outcomes - Explain how these impact on the budgeted figures and demonstrate understanding of the different methods of costing |
| BUDGET | Definition - Financial plan for an organisation prepared in advance Aim - Mechanism through which the objectives of the organisation can be achieved |
| PURPOSE OF BUDGETING | The Budget compels planning The budget communication and co-ordinates The budget can be used to authorise The budget can be used to monitor and control |
| BUDGET ENVIRONMENT | There are several considerations when creating a BUDGET 1) External Influences (changes regarding Economy) 2) Internal Influences (materials lost in production) |
| FINANCIAL & MANAGEMENT ACCOUNT (WHAT ARE THE DIFFERENCES) | FINANCIAL ACCOUNTS provide information to external groups, such as the owners of the business, financial accounts are a historic record. MANAGEMENT ACCOUNTS provide accounting information for INTERNAL USERS such as Managers, it provides information which managers can use to make decisions. COST ACCOUNTS are a large part of Management accounting, it is concerned with establishing costs. |
| MARGINAL COSTING | Categories costs according to their cost behaviour and divides them into variable and fixed costs Stock Costs Include: Direct materials Direct Labour Direct Expenses Variable Production/Overheads NO FIXED PRODUCTION OVERHEADS ARE ABSORBED IN STOCK |
| MARGINAL COSTING - EXPLAINED | 1) Treats fixed costs as costs of the period, not of the product. 2) Considers contribution concept ie contributes to the fixed costs 3) Only variable costs are linked to output 4) Unit contribution - selling price per unit less the variable costs per unit. 5) Total contribution - Sales income less the variable costs of the units sold in one period. |
| ABSORPTION COSTING | Determines a full cost for each unit of output, it therefore includes Direct Materials Direct Labour Direct Expenses Variable Production overheads Fixed production overheads |
| BASIS OF ABSORTION | The absorption rate is calculated at the start of the period and is based on 1) Budgeted quantities 2) Budgeted overheads BASIS OF ABSORPTION 1) Rate per unit (for one product cost centre) 2) rate per direct labour cost 3) rate per machine hour |
| ALLOCATION | ALLOCATE Any overheads incurred specifically by cost centre |
| APPORTIONMENT | Primary - share out overheads between cost centres using a reasonable basis Secondary - share out overheads from service centres between cost centres involved with production |
| ABSORPTION | Absorb (ie add) the overheads to the unit cost of production |
| STEPS IN ABSORPTION COSTING | 1) Costs are divided into direct costs and indirect costs. 2) Indirect costs are allocated or apportioned to cost centres. 3) If costs have accumulated into service cost centres then this is shared amongst the production cost centres using secondary apportionment. 4) Production cost centres are now absorbed using an a pre-determined rate such as direct labour hours. This is the OAR (OVERHEAD ABSOPTION RATE) |
| ACTIVITY BASED COSTING | Absorbs costs on the basis of the activities that drive them, similar to absorption. Costs are incurred by activities Each activity has a cost driver Costs are grouped into pools |
| COST POOL | Power Material Handling Materials receipt Production Planning Sales Administration Buying |
| DRIVER | No. of Machine operation/hours Weight of materials handled No. of batches of material received No. of Jobs Planned No. of orders received No. of orders placed |
| PROFITS WITH CLOSING STOCK | Profits differ lf there is closing stock Marginal Costing - All the periods fixed production overheads are charged in full against that periods profit Absorption Costing - some of the periods fixed production overheads will be carried forward in the closing stock value and charged against the next periods profit. |
| RESPONSIBILTY CENTRES & AUTHORITY | Cost Centre - control costs Profit Centres - control costs and income Investment Centres - control costs, income and investment Budget Centres - controlled by the budget holder |
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