AAT Level 3 > MATS > Flashcards

MATS Flashcards

(101 cards)

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1
Q

What is the purpose of management accounting?

A

To provide information for use within an organisation

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2
Q

What is data called once its processed into a useful form?

A

Information

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3
Q

What does the ACCURATE acronym stand for?

A

Accurate
Complete
Cost beneficial
Understandable
Relevant
Authoritative
Timely
Easy to use

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4
Q

Cost unit vs unit cost

A

A cost unit is the item you measure, while a unit cost is the amount of money it costs to produce that item.

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5
Q

What is a composite cost unit?

A

A composite cost unit is a cost unit made up of multiple related units combined together because the service or product can’t be measured by just one unit.

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6
Q

What is a cost centre

A

A cost centre is a part of a business (such as a department, location, person, or machine) where costs are collected and controlled

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7
Q

What is a cost card

A

Lists the different costs incurred

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8
Q

What are the different categories cost be classified into?

A

Element
Function
Nature

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9
Q

What are element costs?

A

Grouping costs by the type of resource used

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10
Q

What are costs classified by function?

A

Costs classified into where they are used in the business. Eg admin costs, production costs, distribution costs

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11
Q

What are costs classified by nature?

A

Classifies costs by direct and indirect

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12
Q

Can indirect costs be identified with a cost unit?

A

No

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13
Q

What else are indirect costs referred as?

A

Overheads

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14
Q

Variable costs

A

A cost that changes with a change in activity or output

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15
Q

Fixed costs

A

A cost not impacted by changes in activity

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16
Q

What is a stepped fixed cost?

A

A cost that remains fixed to a certain activity level and then rises to a new higher fixed level if activity goes beyond a certain amount.

Eg rent if more space is needed

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17
Q

What is a semi variable cost?

A

A cost that has both a fixed and variable element.

Eg electricity - standing charge and charge for usage

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18
Q

Fixed costs are constant in …

A

Total

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19
Q

Variable costs are constant …

A

Per unit

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20
Q

Semi variable costs are neither…

A

Constant in total nor constant per unit

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21
Q

Stepped fixed costs are … (not definition)

A

Fixed in total to a certain range

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22
Q

Total cost of a semi variable costs product formula

A

Total cost = fixed costs + (cost per unit x number of units)

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23
Q

What is marginal costing

A

Marginal costing values each unit of inventory using only the variable production costs needed to make that unit.

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24
Q

In marginal costing, are variable non production costs included in cost of sales?

A

No

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25
Formula for contribution:
Sales revenue less all variable costs
26
There is a … relationship between no. Of sales made and value of contribution
Direct
27
What is absorption costing
A method of building up a full product cost which adds direct costs and a proportion of indirect costs
28
29
Pros of absorption costing
Adheres to accounting standard for IAS 2 All production costs are covered
30
Specific order costing
Costing system used when the work done consists of separately identifiable jobs or batches
31
Continuous operation costing
Costing method used when the goods are produced as a direct result of continuous operations
32
Job costing is a form of
Specific order costing
33
What is job costing
Job costing is a method used when every job is different, so each one has its own separate cost calculated.
34
What is batch costing
Batch costing is a method used to calculate the cost of a group of identical items produced together as one batch, rather than costing each item individually.
35
Service costing is a form of…
Continuous operation costing
36
In absorption costing, how are costs split
By function
37
In absorption costing when are non production overheads deducted
After gross profit
38
What are product costs
Fixed production costs
39
How are costs split in marginal costing
Based on behaviour
40
Are variable non production overheads included in the valuation of inventory
No
41
In marginal costing, what are fixed overheads called
Period costs
42
Why will profit levels between marginal and absorption costing differ?
If there is a change in inventory levels
43
What is prime cost
Total of direct costs
44
What are marginal costs made up of
Total of direct costs and variable indirect costs (all associated with production)
45
What are absorption costs made up of?
Total of direct and indirect production costs (variable and fixed)
46
Does unit cost stay the same in fixed or variable costs?
Variable
47
What are the inventory control systems
Fixed quantity system - replenish once it falls below a certain level by a fixed amount Periodic review system - levels are reviewed at fixed points in time when the quantity to be ordered is decided
48
What is the buffer inventory
The minimum level of inventory to be held
49
What is lead time
The time it takes to receive the order
50
Average usage time definition (buffer inventory)
Inventory requirements during the lead time
51
What is the maximum inventory formula
Buffer inventory + maximum re order quantity
52
What is the re order level formula
(Average usage time x average lead time) + buffer inventory
53
Minimum re order quantity formula
Average usage x average lead time
54
Minimum re order quantity formula + definition
The quantity which will restore inventory to the re-order level, at which point another order will need to be placed. Average usage x average lead time
55
What is the economic order quantity
The order size that minimises the total cost
56
Formula for economic order quantity
square root of (2 x cost of order x annual demand) / cost of holding one unit of inventory for one year
57
What are the two inventory valuation methods
FIFO AVCO
58
What is FIFO
Assumes issues will be made based on the oldest prices, leaving the modt recent prices in stores.
59
What is AVCO
Assumes that issues will be made based on the average cost per unit of the items in stores
60
How do you know if AVCO is being used?
Check cost per unit of the first issue and if it matches the balance before the issue then AVCO is being used
61
If prices are rising does FIFO or AVCO return a higher profit?
FIFO
62
If prices are declining, does AVCO or FIFO return a higher profit?
AVCO
63
Pros and cons of FIFO
Pros: More up to date as it leaves most recent purchases in closing inventory Cons: Identical jobs may have different costs Out of date valuation on issues to production
64
Pros and cons of AVCO
Pros: Compromise on inventory valuation and issues Cons: Average price rarely reflects actual purchase price
65
Formual for total production
Sales + wastage
66
Overtime premium
The extra paid above the normal rate for overtime hours
67
What are piecework payments
Employees are paid per unit of output produced
68
Examples of labour production overheads
Supervisors
69
Examples of direct expenses ( except material and labour)
Patent costs
70
What is allocation in overheads?
When an overhead relates entirely to one centre
71
What is apportionment to overheads?
When an overhead relates to more than one centre and is shared over them.
72
What is re-apportionment
Apportion the service cost centre total costs to the production cost centres that make use of the service cost centre.
73
What is the key rule or the direct method of overhead allocation
Service departments dont give to service departments
74
Overhead absorption
The charging of a production cost centre’s overhead costs to the cost unit produced by the cost centre.
75
Overhead absorption rate formula
Total budgeted overhead / total budgeted activity
76
Can you change the OAR during a period?
No
77
If actual overhead is greater than absorbed overhead its been … absorbed
Under
78
Do service cost centres get OARs
No
79
What is a cost pool?
The pooling of overhead cost which relates to a specific activity
80
What is a cost driver?
An activity or factor which generates cost
81
What is activity based costing?
An alternative method of allocating production overhead to units of production?
82
ABC pros
Better insight into what causes overhead costs - helps to control them More accurate cost per unit Can be applied to all overhead costs Applicable in a complex business environment
83
ABC Cons
Impossible to allocate all overheads to specific activities Limited benefits if overheads are small Choice of activities and cost drivers is subjective
84
CVP assumptions
Costs are assumed to be either fixed or variable Economies of scale is ignored Selling prices don’t change with volume Volume is the only factor affecting cost
85
In cost volume profit analysis, what is the formula for contribution per unit?
Selling price per unit - total variable cost per unit
86
What is the breakeven point?
The volume of sales at which neither a profit or a loss is made
87
When there is no profit or loss we can assume total fixed costs equals…
Total contribution
88
Breakeven point formula
Fixed costs divided by contribution per unit
89
Margin of safety definition
The amount by which the budgeted sales can fall before a loss is made
90
Sales volume to achieve a particular profit formula
( Fixed costs + required profit ) / contribution per unit
91
How do you calculate achieving target profit by a change in selling price
Calculate change in required contribution per unit and add to original sales price
92
P/V Ratio definition
The measure of the rate at which profit is generated with sales volume
93
P/V Ratio = Contribution per unit / …
Selling price per unit
94
Breakeven point formula using P/V Ratio
Total fixed costs / P/V ratio
95
What is a standard cost
A pre determined unit cost which is prepared for each cost unit
96
What is the difference between a standard cost and actual cost called?
A variance
97
What is a fixed budget
A budget for a single activity level (eg 1000 units)
98
What is a flexed budget?
A budget that is adjusted (flexed) to the actual level of activity after the period ends
99
What is a rollling budget
A budget that is kept continuously up to date by adding a new accounting period once one has expired.
100
What is an adverse variance
When actual costs exceed budgeted costs
101
What is a favourable variance
When actual cost is less than budgeted
AAT Level 3
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