Page 115 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes 5.7 Keywords

Cost Centre: The location at where the cost of the activity is ascertained.
Cost of Production: It is the combination of cost of manufacturing an article or a product and
administrative cost.
Cost of Sales: It is the entire cost of a product.
Cost Sheet: It is a statement prepared for the computation of cost of a product/service.

Cost: Expense incurred at the either cost centre or service centre.
Direct Cost: Cost incurred which can be easily ascertained and measured for a product.
Factory Cost: It is the total cost incurred both direct and indirect at the work spot during the
production of an article.
Indirect Cost: Cost incurred cannot be easily ascertained and measured for a product.
Prime Cost: Combination of all direct costs viz. Direct materials, Direct labour and Direct expenses.
Product Centre: It is the location at where the cost is ascertained through which the product is
passed through.
Profit centre: It is responsibility centre not only for the cost and revenues but also for profits for
the activity.
Selling Price or Sales: The summation of cost of sales and profit margin.
Service Centre: The location at where the cost is incurred either directly or indirectly but not
directly on the products.
5.8 Self Assessment

Choose the appropriate answer:
1. Fixed cost is the cost under the classification of
(a) Variability (b) Normality
(c) Controllability (d) Functions
2. Standard costing is brought under the classification of
(a) Controllability (b) Functions

(c) Planning and control (d) Both (a) & (c)
3. Marginal costing is classified on the basis of
(a) Variability (b) Managerial decisions
(c) Time (d) Both (a) & (b)
4. Electricity charges incurred by the firm is

(a) Fixed cost (b) Semi-variable cost
(c) Variable cost (d) None of the above
5. Cost is
(a) An expense incurred (b) An expenditure incurred
(c) An income received (d) None of the above

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