Costing

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Define marginal costing:
Allocates the variable costs but not fixed
1 of 10
Define absorption costing:
'Absorbs' fixed costs like a ratio depending on output/usage
2 of 10
Define full costing:
Covering fixed and variable costs
3 of 10
How do you work out marginal costing?
(Price per unit - variable cost per unit) x sales = full contribution
4 of 10
How do you work out absorption costing?
Find percentage: e.g for rent = factory time per unit / total factory time, then x by total fixed costs, then x by all products to find out total fixed costs
5 of 10
How do you work out full costing?
Direct cost for item/ total direct (variable) costs, then x by total indirect (fixed) costs, then indirect + direct
6 of 10
What's 3 limitations of marginal costing?
Assumes fixed costs, variable costs change, may not consider whole order
7 of 10
Give an advantage of absorption costing
More accurate and fair
8 of 10
Give 2 limitations of absoption costing
It's complicated and time consuming
9 of 10
Give a limitation of full costing
Not very accurate - 'blanket effect' for the fixed costs
10 of 10

Other cards in this set

Card 2

Front

Define absorption costing:

Back

'Absorbs' fixed costs like a ratio depending on output/usage

Card 3

Front

Define full costing:

Back

Preview of the front of card 3

Card 4

Front

How do you work out marginal costing?

Back

Preview of the front of card 4

Card 5

Front

How do you work out absorption costing?

Back

Preview of the front of card 5
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