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Terms distinguished
i) Sunk cost (historical cost) is a cost that has already been incurred e.g. depreciation and
research costs, and as such a sunk cost is irrelevant for decision making. On the other hand,
opportunity cost is the benefit sacrificed when a certain course of action is preferred or taken
over the next best alternative e.g. a firm may lose profit from product X if it chooses to
manufacture product Y over product X. Opportunity cost is relevant for decision making.
ii) Cost cent res are departments that add to the cost of an organization but only indirectly add to
the profit of the firm e.g. research and development, marketing, customer service. Profit
centres are parts of a firm that directly add to its profit. It is a section of a firm treated as a
separate business.
iii) Direct lab our cost is cost of lab our that can be traced to the making of a product e.g. wages
paid to a machine operator. Indirect lab our cost on the other hand is cost of lab our that is
incurred in production but cannot be traced to the making of a product e.g. supervisor's salary
iv) Prime cost is the primary costs of production. It is the sum total of direct materials, direct
lab our and direct expenses incurred by manufacturing firms. Manufacturing overheads (or
production/factory overheads) are all the expenses incurred in the production of goods but
cannot be traced to a specific unit e.g. indirect materials (packaging), indirect lab our
(supervisor's salary) and other indirect expenses (rent, lighting, depreciation).
marto answered the question on February 15, 2019 at 08:10
- The Luxury Hotels Ltd is used for conference bookings and private bookings. The conference
bookings include bookings for rooms each week while the remaining rooms are...(Solved)
The Luxury Hotels Ltd is used for conference bookings and private bookings. The conference bookings include bookings for rooms each week while the remaining rooms are used for private guest bookings.
Additional information:
1. Variable cost of accommodating each guest is Sh. 1,750
2. Variable cost per week per room available is Sh. 5,600
3. The general fixed cost for private bookings per week is Sh. 8,100
4. The hotel charges Sh. 3,000 per person per night for accommodation for private guest bookings.
5. The hotel has been experiencing a high rate of staff turnover over the last 12 months.
6. Some of the costs for private guest bookings vary with the number of guests, regardless of the
length of their stay, while others vary with the number of rooms available in any week.
Required:
a) Total cost per guest per night for private guest bookings over the ten week period
b) Contribution and profit for private guest bookings for the ten week period
c) Highlight four possible reasons for the high rate of staff turnover in the hotel
Date posted: February 15, 2019. Answers (1)
- Fair Price Limited produces a single product 'Zed': The store's manager has provided the
following information relating to the month of August 2010:(Solved)
Fair Price Limited produces a single product "Zed': The store‟s manager has provided the
following information relating to the month of August 2010:
Date posted: February 15, 2019. Answers (1)
- Distinguish between the following terminologies as used in cost accounting:
i) Relevant range and relevant costs.
ii) Opportunity costs and discretionary costs.
iii) By-products and joint products.(Solved)
Distinguish between the following terminologies as used in cost accounting:
i) Relevant range and relevant costs.
ii) Opportunity costs and discretionary costs.
iii) By-products and joint products.
Date posted: February 15, 2019. Answers (1)
- Distinguish between 'committed fixed costs' and 'discretionary fixed costs'.(Solved)
Distinguish between 'committed fixed costs' and 'discretionary fixed costs'.
Date posted: February 15, 2019. Answers (1)
- Distinguish between the following sets of terms:
i) Direct labour cost and indirect labour cost.(Solved)
Distinguish between the following sets of terms:
i) Direct labour cost and indirect labour cost.
Date posted: February 15, 2019. Answers (1)
- Explain the meaning of the following term in the context of cost accounting:
- Cost centre.(Solved)
Explain the meaning of the following term in the context of cost accounting:
- Cost centre.
Date posted: February 15, 2019. Answers (1)
- Understanding of cost behavior patterns is important in making financial planning and cost
control decisions.
Required:
In relation to the above statement, describe three ways in which costs...(Solved)
Understanding of cost behavior patterns is important in making financial planning and cost
control decisions.
Required:
In relation to the above statement, describe three ways in which costs might be classified
according to behavior.
Date posted: February 15, 2019. Answers (1)
- Afya Bora Health Centre has a capacity of 20 beds. The following information relates to the
centre's operations for the year ended 30 June 2014:(Solved)
Afya Bora Health Centre has a capacity of 20 beds. The following information relates to the
centre's operations for the year ended 30 June 2014:
Date posted: February 15, 2019. Answers (1)
- Cost accounting is often described as the provision of information required by management for
specific purposes'
Required:
State six of these specific purposes.(Solved)
Cost accounting is often described as the provision of information required by management for
specific purposes'
Required:
State six of these specific purposes.
Date posted: February 15, 2019. Answers (1)
- Daniel Mutiso, the Cost Accountant of Abra Ltd. feels that he is getting overworked and has
recommended that a management accountant be employed to take up...(Solved)
Daniel Mutiso, the Cost Accountant of Abra Ltd. feels that he is getting overworked and has
recommended that a management accountant be employed to take up other responsibilities in the
organization.
However, the management of the company equally argues that the work is the same and that a
decision to hire a management accountant is against their cost reduction policy.
Required:
In the light of the above statement, explain to the management three differences between management
accounting and cost accounting to help them make a fair decision.
Date posted: February 15, 2019. Answers (1)
- Describe five ways in which cost accounting complements financial accounting in terms of
providing information to managers for better decision making.(Solved)
Describe five ways in which cost accounting complements financial accounting in terms of
providing information to managers for better decision making.
Date posted: February 15, 2019. Answers (1)
- The success of an organisation in cost control and cost reduction depends largely on the
installation of an ideal cost accounting system which identifies, classifies and...(Solved)
The success of an organisation in cost control and cost reduction depends largely on the
installation of an ideal cost accounting system which identifies, classifies and records all costs
accurately and promptly.
Required;
With reference to the above statement, explain four conditions for an effective costing system.
Date posted: February 15, 2019. Answers (1)