Chap 2

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carolinejonsson
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190814
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Chap 2
Updated:
2012-12-29 07:58:10
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Chap 2
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  1. What is the definition of a cost?
    • A physical quantity measurement
    • Multiplied by a price measurement

    • eg.
    • 100 units at 6€ = cost of €600
  2. What classifications is there?
    • Variable Cost
    • Which variy directly with changes in the level of activity, over a defined period of tim
    • Fixed cost
    • Which is not affected by changes in the level of activity, over a defined period of time
    • Direct cost
    • Directly traceable to an identifiable unit, such as a product or service or department of the business for which cost are to be determined
    • Indirect cost
    • Are spread over a number of identifiable units of the business such as products or services ¬†or departments for which cost are to be determined. Indirect cost are also called overhead costs.
    • Product cost
    • those costs associated with goods or services purchased or produced for sale to customers
    • Period cost
    • Those costs which are treated as expenses in the period in which they are incurred.
  3. What is the meaning of activity and output?
    • Activity= generally, any physical operation that takes place in an organization
    • Output= Product or service provided by the organization
  4. Explain semi-variable?
    Partly fixed and partly varies with changes in the level of activity over a defined period of time
  5. Explain step cost?
    Fixed cost increases by steps
  6. What are some examples of variable costs?
    • -Materials used to manufacture a unit of output or to provide a type of service
    • -Labour costs of manufacturing a unit of output or providing a type of service
    • -Commission paid to a salesperson
    • -Fuel used by a haulage company
  7. What are some examples of fixed costs?
    • -Rent of buildings
    • -Salary paid to a supervisor
    • -Advertising in the trade journals
    • -Business rates paid to the local authority
    • -Depreciation of machinery calculated on the straight-line basis
  8. What are some examples of semi-variable costs?
    • -Office salaries where there us a core of long-term secretarial staff plus employment of temporary staff when activity levels rise.
    • -Maintenance charges where there is a fixed basic charge per year plus a variableelement depending on the number of callouts per year
  9. Explain cost centre?
    A unit of the organization in respect of which a manager is responsible for costs under his or her control
  10. Explain profit centre?
    A unit of the organization in respct of which a manager is responsible for revenue as well as costs
  11. Explain investment centre?
    A unit of the organization in respct of which a manager is responsible for capital investment decisions as well as revenue and costs.

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