ELEMENTS OF COSTING TERMINOLOGY
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| AVCO | Weighted Average
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| FIFO | First In First Out
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| LIFO | Last In First Out
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| Financial Accounting | External, historic, legal
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| Management Accounting | Internal, future, when necessary
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| Cost Accounting | It is concerned with establishing costs.
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| Cost Centre | A small part of a business for which costs are determined
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| Cost Classification by function | Cost of sales, Distribution costs, Administrative expenses
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| Cost Classification by element | Materials, Labour, other expenses (overheads)
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| Cost Classification by relationship to cost units | Direct, Indirect
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| Cost Classification by behaviour | Fixed, Variable, Semi-variable, Stepped
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| Direct Cost | An item of cost that is traceable directly to a cost unit
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| Indirect Cost | A cost that cannot easily be identified with any one finished unit and are often referred to as overheads.
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| Variable Costs | Are costs that vary (usually assumed in direct proportion) with changes in level of activity.
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| Fixed Costs | These costs are not affected by changes in activity level.
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| Semi-variable Costs | A fixed element and a variable element.
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| Stepped Costs | Costs that remain fixed up to a particular level of activity, but which rise to a higher (fixed) level if activity goes beyond that range.
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| Total costs 1 | = Fixed costs + Variable costs
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| Total costs 2 | = Fixed costs + (number of units x variable cost per unit)
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| Coding - Numeric | 100/310
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| Coding - Alphanumeric | A230
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| Coding - Alphabetic | AB/RT
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| Direct Materials (Raw) | Materials that are used directly as part of the production of the goods.
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| Indirect Materials (Raw) | Materials used in the production process which are not used in the actual products themselves.
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| Work in progress | Units that have been started but are incomplete.
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| Finished goods | These goods are completed.
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| Salaried Employee | Where gross pay is agreed at a fixed amount for a period of time.
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| Hourly Rate Employee | Payment for a set hourly rate for each hour that he works.
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| Overtime | The number of hours worked over and above normal weekly hours.
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| Overtime Premium | The amount over and above the normal hourly rate that employees are paid for overtime hours.
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| Output Related Pay | This is known as piecework and is where a fixed amount is paid per unit of output.
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| Piece Rate with Guarantee | A guaranteed amount so if they do not make enough units they will still be guaranteed a day rate.
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| Variance | The difference between actual and expected (or budgeted) cost is known as a variance.
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| Favourable or FAV | Is a variance when the actual cost is lower than expected,
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| Adverse or ADV | Is a variance when actual cost is higher than expected.
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