CMA Inter Paper 8: Cost Accounting flashcards
CMA Inter Paper 8: Cost Accounting · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Cost object
- Any item, product, service, department, customer or activity for which costs are separately measured and accumulated to support management decisions.
- Cost unit versus cost centre
- A cost unit is the unit of output for which cost is ascertained; a cost centre is a location, function or person where costs are collected before allocation.
- Prime cost
- The sum of direct material, direct labour and direct expenses attributable to a product or job before any overheads are added.
- Semi-variable cost
- A cost containing both fixed and variable elements, such as a utility bill with a fixed standing charge plus a per-unit usage rate.
- Economic order quantity
- The order size minimising total inventory cost, computed as the square root of twice annual consumption times ordering cost divided by annual holding cost per unit.
- Reorder level
- The inventory level at which a fresh order is placed, equal to maximum consumption multiplied by the maximum reorder period.
- Halsey premium plan
- A wage incentive scheme paying time rate for hours worked plus fifty percent of the time saved, multiplied by the hourly rate.
- Rowan premium plan
- A wage incentive scheme paying time rate plus the proportion of time saved to time allowed, applied to time taken and the hourly rate.
- Overhead absorption rate
- Budgeted overhead divided by the budgeted absorption base such as direct labour hours, machine hours, direct wages or units produced.
- Under-absorbed overhead
- The amount by which overhead actually incurred exceeds overhead absorbed into production, arising from lower output or higher spending than budgeted.
- Job costing
- A costing method accumulating material, labour and overhead costs separately for each customer order or distinct job of non-standard work.
- Contract costing
- A costing method applied to long-term construction contracts, recognising costs, work certified, retention money and attributable profit by stage of completion.
- Notional profit
- In contract costing, the value of work certified plus work uncertified less the cost of work completed to date.
- Equivalent production
- The conversion of partly completed work-in-progress into equivalent completed units using the degree of completion, used to compute process cost per unit.
- Operating costing
- A costing method for services using composite cost units such as passenger-kilometre, tonne-kilometre, bed-day or kilowatt-hour.
- Material price variance
- The difference between standard price and actual price, multiplied by the actual quantity of material purchased or used.
- Labour efficiency variance
- The difference between standard hours for actual output and actual hours worked, multiplied by the standard labour rate.
- Target costing
- A technique deriving allowable cost by deducting the desired profit margin from a competitive market price, then closing the cost gap.
- Activity-based costing
- A costing system assigning overheads to products through activity cost pools and cost drivers reflecting the actual consumption of activities.
- Life-cycle costing
- A technique accumulating all costs over a product's entire life from design and development through manufacture, distribution, use and disposal.
- Throughput accounting
- A management technique measuring throughput as sales less direct material, focusing improvement on the binding constraint or bottleneck resource.
- Relevant cost
- A future, incremental cash cost that differs between alternatives and therefore should be considered in a decision.
- Opportunity cost
- The contribution or benefit forgone from the next best alternative use of a scarce resource, included in relevant costing for decisions.
- Break-even point
- The sales volume or value at which total contribution equals fixed cost, giving neither profit nor loss.
- P/V ratio
- The contribution to sales ratio, computed as contribution divided by sales, used to find break-even sales and required profit sales.
- Margin of safety
- The excess of actual or budgeted sales over break-even sales, indicating how far sales may fall before a loss arises.
- Limiting factor decision
- When a resource is scarce, products are ranked by contribution per unit of that scarce resource to maximise total contribution.
- CAS 1 classification of cost
- The cost accounting standard prescribing consistent classification of costs by element, nature, behaviour and function for cost statements.
- CAS 2 capacity determination
- The cost accounting standard defining installed, normal and actual capacity and the treatment of idle capacity in overhead absorption.
- CAS 3 overheads
- The cost accounting standard prescribing collection, primary and secondary distribution, and absorption of overheads on a documented consistent basis.
- CAS 6 material cost
- The cost accounting standard covering procurement, receipt, storage, issue and valuation principles for direct and indirect materials.
- Cost audit under Section 148
- A statutory audit of cost records of specified industries, conducted by a cost accountant in practice under the Companies Act 2013.