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Chapter 1 (Calculating the cost of Good & Services (Calculate the…

- - - - Indirect Materials
      - Indirect Labour
      - Indirect Expenses
  - - - Direct Labour
      - Direct Expenses
      - Direct Materials
- - - - Insurance Premiums
      - Cost of wages/salaries of Office Staff
      - Telephone Charges
      - Running cost pf delivery Vehicles
      - Depreciation charge for non-current assets
  - - - Wages paid directly to those who work the machinary on the production line
      - Wages/Salaries of employees such as managers and Office Staff.
    - - Any expenses which can be identified with particular units of output eg. royalties payable, designer of the product, fees linked to specific output and paid to people who are not employees.
      - All other expenses eg. rent rates telephone, lighting electricity, insurance advertising. Cannot be identified directly with each unit.
    - - The cost of Raw Materials from which the finished product is made.
      - The cost of all other materials eg. grease for machines ad cling materials.
- - - - Highest 15,000 units £200,000
      - Lowest 10,000 units £150,000
      - Then calculate Variable Cost Per Unit by finding the difference between the lowest units and price and the highest units and price. So 5,000 units and £50,000
      - 50,000/5,000 = £10 = VCPU
      - 10,000 x £10 = 100,000 VC -150,000 = 50,000 FC
  - - - Output 4000 units, equals £10 per unit
      - Output 10,000 units, equals £4 per unit
    - - Fixed costs do not always remain fixed at all levels of production.
      - Example; A decision to double production is likley to increase the fixed costs - an increase in factory rent. Because an additioonal factory may be requriored.
      - Called stepped fixed costs because they increase all at once and by a lot, once the capacity is reached.
      - Stepped pay more because of a bigger capacity
- - - - Segment of a business to which costs can be charged, revenue can be identified and profit can be calculated.
    - - Segment of the business where profit is compared with the amount of money invested in the centre
    - - Segment of the business to which costs can be charged
    - - Segment of the business where sales revenue from the product sold or service provided is measured
    - - Segment of a business : : for which a manager is accountable
  - - - A cost that cannot be identified directly with each unit of output
    - - a cost that can be identified directly with each unit of output
    - - Other costs which cannot be included in materials or labour
    - - The total of all direct costs
    - - Costs which combine a fixed and variable element
    - - Costs which combine a fixed and variable element
    - - The cost of employees' wages and salaries
    - - The costs of raw materials, components and other goods used.
    - - Costs which vary directly with output
    - - List of the total of the direct costs and the overheads.
  - - - Unit of output which comprises two variables
    - - Costs that become part of the manufactured product
    - - Unit of output which costs can be charged
    - - Costs that cannot be assigned to the manufactured product and are incurred in a period of time eg. Monthly
    - - Ethical principle requiring accounting staff to be straightforward and honest in all professional and business relationships
- - - - Looking at direct an indirect costs to see where savings could be made eg. the business might be able to reduce the cost of direct labour.
    - - Looking at the different departments to see which are the high-spending departments - perhaps savings can be made
    - - Looking for high cost elements in order to make savings eg. labour might be identified as being too high.
    - - Identifying the costs as being fixed, emi-variuable or vaiable the business might be able to makje savings by altering the balance betweeen the fixed and variable.