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Explain prime cost?
The cost of direct materials, direct labour and other direct costs of production.
Explain production overhead?
The total of indirect material, indirect labour and other indirect costs of production
explain total product cost?
Prime cost+ producation overhead cost
Describe stock control/ materials control procedures?
- 1. Production manager takes decision on the minimum level of stock to be held
- 2. Storekeeper makes regular checks of physical stock levels against minimum requirements. When stock has fallen to minimum level, storekeeper sends a request to the buying department for replacement items to be purchased.
- 3. Buying department sends an order to the supplier
- 4. Materials arrive and are received by storekeeper
- 5. Suppliers invoice is received by accounts department
- 6. Storekeeper issues materials to production department on the basis of a requisition note
What is included in materials handling and control documents?
- Purchase requisition
- Purchase order
- Goods received note
- Suppliers invoice
- Stores requisition
Explain waste and scrap?
- Waste: Materials that have no value
- Scrap: Waste material that can be sold for disposal, usually at a low price
Describe the Costs when input prices are changing?
- First-in-first-out (fifo)
- -Assume that the goods which arrived first are issued first
- Last-in-first-out (lifo)
- -Assume that the goods which arrived last are issued first
- Average cost
- -Assume that all goods are issued at the average price of the stock held
What types of pay schemes is there in labour costs?
- Monthly salary
- Basic salary plus extra payments depending on output levels or targets achieved
- Hourly rate based on actual hours worked
- Piecework based on number of items of output or units of service
- Benefits in kind
- Employrs labour costs, such as employers contributaions to national insurance
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