Chapter 1

Question 1

Compare the………. of financial and managment accounts.

1. Purpose
2. Legal requirement
3. Format (body)
4. infomation provided

Answer 1

Question 2

Give 2 examples of cost objects

Answer 2

1. A operating theatre in a hospital
2. A branch of a highg street bank

Elements of costs are NOT oporaing costs

Question 3

Define the following concepts:

1. cost object
2. cost centre
3. cost unit
4. composite cost unit

Answer 3

Question 4

1. What are driect costs (prime costs)?
2. Give 3 examples of direct costs

Answer 4

1. Costs that can be traced in full to a unit cost.
2. Direct material cost, Direct laybour cost & direct expenses e.g licence fee per table.

Question 5

1. What are indirect costs (overheads)?
2. Give 3 examples of indirect costs?

Answer 5

1. Costs that can not be directly traced to a cost unit.
2. Indirect material costs - Glue used that may have been spread across several proucts

Indirect Laybour costs - supurvisor wages of someone covering multiple projects. / Overtime due to a heavy workload (not caused by one job)

Indirect expenses - rent of factory

Question 6

1. What are variable production overheads?
2. What are fixed production overheads?

Answer 6

1. Product costs that vary with units sold - e.g electricty used → they will always be included in the stock value
2. Product or period costs - e.g factory rent → not always included in stock value.

• ​included in stock value = product cost
• expensed within the year = period cost

Question 7

1. What are non production overheads?
2. Give examples of these

Answer 7

1. Expenses relating to the year not included in the stock value.
2. Admin costs, seeling costs (costs incured raising sales -advertising), distribution costs

Question 8

Cost behaviour

1. What is a fixed cost?
2. how is cost per unit effected by the activity level of a fixed cost?

Answer 8

1. A cost to the business that doesnt change for a period of time - e.g rent, salaries
2. Fixed costs per unit of activity will fall as activity level increases as the cost id spread over more units. (increased hours worked)

Question 9

Cost behaviour

What is a varaiable cost?

Answer 9

• Variable costs per unit of activity remain constant as the activity level changes.
• Total varaible costs will increases as activity level increses.
• E.g 1m wood at 4m remains £4 irrispective of how mny metres brought. For 20m the cost will be £80.

Question 10

Drawing graphs show how the following chang with activity level…

1. Fixed costs in total
2. Fixed costs per unit
3. Variance costs in total
4. Varaible costs per unit

Answer 10

Question 11

1. What is a semi-variable cost (mixed cost)?
2. Draw a graph to show this

Answer 11

A cost that has both fixed and variable elements → e.g. aphone bill which compramised of both fixed line rental and the variable component of cost of calls made.

Question 12

1. What is a stepped fixed cost?
2. Use a graph to show this

Answer 12

Question 13

1. What is responsilbility accounting?
2. What is a responsibility centre?

Answer 13

Question 14

1. What are controllable cost?
2. What are uncontrollable cost?

Answer 14

Question 15

To comply with ethical standards, what should managment accounts be?

Answer 15

Question 16

ICEAW exemplifies which theroretical approach to ethical codes?

Answer 16

A framework based approach

Question 17

Why would lease ayments not be the concern of a supervisor in a productions department?

Answer 17

They are the responsibility of the finance department