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Management Accounting To provide information for use within an organisation
Management Information Should be accurate, relevant and complete.
Cost Accounting Concerned with establishing costs
Cost Object Anything for which costs can be ascertained
Cost Unit Unit of product or service in relation to which costs are ascertained
Responsibility Centre Individual part of a business whose manager has personal responsibility for its performance
Cost Centre Production or service location, function or activity or item of equipment whose costs are identified and recorded
Profit Centre Part of the business for which both the costs incurred and the revenues earned are identified
Product Cost A cost that relates to the product or service being produced or provided
Period Cost A cost that relates to a time period
Cost Card Used to show the breakdown of the costs of producing output based on the classification of each cost
Cost by Element Materials, labour, expenses
Cost by Function Production, Administration, Distribution
Cost by Nature Direct, Indirect
Cost by Behavior Variable, Fixed, Semi-variable, Stepped
High-Low Method Used to calculate variable and fixed element of semi-variable costs.
Inventory Generally the largest single item of cost for a business.
FIFO First In, First Out
LIFO Last In, First Out
AVCO Averaged Weighted cost
Economic Order Quantity Most economic quantity of inventory minimizing cost of having inventory
Re-order Level Level at which inventory falls before placing an order
Maximum inventory level Highest quantity of inventory which should be held
Minimum Inventory Level Lowest quantity of inventory which should be held
Overtime payment Total amount paid for hours worked above normal working hours
Overtime premium Extra paid over normal rate for overtime hours
Piecework Rates per unit of output
Royalty/Patent Costs Payable for use of a particular component
Capital Expenditure Non-current asset required for use in business
Revenue Expenditure Acquisition of assets for conversion into goods or cash
Absorption Costing Absorbing production overheads into the cost of a product
Allocation Overheads relating entirely to one production or service Centre
Apportionment Overheads relating to more than one production or service centre
Reapportionment Secondary apportionment
Overhead Absorption Charging of overhead costs to cost units produced
Activity Based Costing Allocates to cost pools before absorbing to units
Fixed Budget Budget produced for a single activity level
Adverse Variance Actual costs exceed budgeted costs
Favourable Variance Actual cost is less than budgeted costs
Flexed Budget Changes as volume of activity changes
Job Costing Where production is made up of individual jobs
Batch Costing Where production is made up of batches of identical units
Service Costing Establishes a cost unit
Process Costing Costing method used where goods or services result for a sequence of continuous processes
Normal Loss Expected loss within a production run
Abnormal Loss Loss in excess of expected loss within a production run
Abnormal Gain Where losses are less than expected within a production run
Marginal Costing Values each unit of inventory at the variable production cost required to make each unit
Contribution Measures difference between the sales price and variable cost per unit
Relevant Costs Costs and revenues that changes as a direct result of a decision that is taken
Avoidable Cost A cost which only occurs as a result of taking the decision,
Breakeven Point Volume of sales at which neither a profit not a loss is made
Margin of safety Amount by which the budgeted sales can fall before making a loss
Margin of safety units Budgeted sales units - breakeven sales units
Margin of safety % budgeted sales units less breakeven sales units divided by budgets sales units multiplied by 100
Target Profit Total fixed costs plus required profit divided by contribution per unit
Profit/Volume Ratio Contribution per unit divided by selling price per unit
Limiting Factor Analysis A resource in short supply which limits production
Payback Period Length of time a project takes to recoup initial money invested in it
Net Present Value/Cost Net benefit/loss in present value terms from an investment opportunity
Internal Rate of Return Calculates the rate of return that one project is expected to achieve if it breaks even
Created by: donnaowen
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