Management Accounting (Costing) Flashcards

The purpose of job costing is to:

Answer: Calculate the cost of a specific, individual job or batch

Job costing accumulates all direct and indirect costs for a specific job or customer order, enabling the business to determine the profitability of each individual job.

Process costing is most appropriate for which type of production?

Answer: Continuous or mass production of a homogeneous product

Process costing is used in industries with continuous production of identical products (e.g., chemicals, oil refining, food processing), where it is impractical to track costs per individual unit.

Normal loss in process costing refers to:

Answer: The expected level of waste or loss that is anticipated in the production process

Normal loss is the anticipated, expected level of loss or wastage inherent in the production process (e.g., evaporation, trimming, spoilage). It is built into the cost per unit calculation.

Which of the following describes semi-variable costs?

Answer: Costs that have both a fixed element and a variable element

Semi-variable (mixed) costs have a fixed component (incurred regardless of activity) and a variable component (increases with output) — for example, a telephone bill with a fixed line rental plus a variable call charge.

The high-low method is used to:

Answer: Separate fixed and variable elements of a semi-variable cost

The high-low method uses the highest and lowest activity levels and their associated costs to estimate the variable cost per unit and total fixed cost component of a semi-variable cost.

Which of the following is an indirect cost (overhead)?

Answer: Depreciation of factory machinery

Depreciation of factory machinery cannot be attributed to individual products — it is an indirect cost (overhead) shared across all products using the factory, absorbed using an OAR.