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    BBMC 1113 Management Accounting: Distinguish Between A "Prime Cost" and A "Production Overheads Cost"

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    王宇璇
    This document provides an introduction to key concepts in management accounting including: 1. Defining financial accounting, management accounting, and cost accounting, and distinguishing between them. 2. Defining cost centers and cost units. 3. Distinguishing between prime costs and production overheads costs. 4. Stating that the three major elements of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead. 5. Classifying costs as either product (inventoriable) or period (non-inventoriable) for a manufacturing company.

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    BBMC 1113 Management Accounting: Distinguish Between A "Prime Cost" and A "Production Overheads Cost"

    Uploaded by

    王宇璇
    93 views2 pages
    This document provides an introduction to key concepts in management accounting including: 1. Defining financial accounting, management accounting, and cost accounting, and distinguishing between them. 2. Defining cost centers and cost units. 3. Distinguishing between prime costs and production overheads costs. 4. Stating that the three major elements of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead. 5. Classifying costs as either product (inventoriable) or period (non-inventoriable) for a manufacturing company.

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    Tutorial 1

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    This document provides an introduction to key concepts in management accounting including: 1. Defining financial accounting, management accounting, and cost accounting, and distinguishing between them. 2. Defining cost centers and cost units. 3. Distinguishing between prime costs and production overheads costs. 4. Stating that the three major elements of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead. 5. Classifying costs as either product (inventoriable) or period (non-inventoriable) for a manufacturing company.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    93 views2 pages

    BBMC 1113 Management Accounting: Distinguish Between A "Prime Cost" and A "Production Overheads Cost"

    Uploaded by

    王宇璇
    This document provides an introduction to key concepts in management accounting including: 1. Defining financial accounting, management accounting, and cost accounting, and distinguishing between them. 2. Defining cost centers and cost units. 3. Distinguishing between prime costs and production overheads costs. 4. Stating that the three major elements of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead. 5. Classifying costs as either product (inventoriable) or period (non-inventoriable) for a manufacturing company.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    BBMC 1113 Management Accounting

    Tutorial 1 Introduction to Management Accounting

    1. Define and distinguish the following terms:

    a) Financial accounting
    b) Management accounting
    c) Cost accounting

    2. Define the terms " cost centre" and "cost unit".

    3. Distinguish between a “prime cost” and a “production overheads cost”.

    4. What are the 3 THREE major elements of product costs in a manufacturing company?

    5. A product cost also known as an inventoriable cost. Classify the following costs as either
    product (inventoriable) costs or period (noninventoriable) costs in a manufacturing
    company:

    a) Depreciation on salespersons' cars -


    b) Rent on equipment used in the factory -
    c) Lubricants used for maintenance of machines -
    d) Salaries of finished goods warehouse personnel -
    e) Factory supervisors salaries -
    f) Heat, water and power consumed in the factory -
    g) Materials used in boxing units of finished product for shipment overseas (unit are not
    normally boxed) -
    h) Advertising outlays. -
    i) Attractively designed box for packaging breakfast cereal. –

    6. Below are listed various costs that are found in organizations.

    a) Hamburger buns in a KFC's outlet.


    b) Advertising by a dental office.
    c) Pineapples processed and canned by San Monte Corporation.
    d) Shipping canned pineapples from a San Monte plant to customers.
    e) Insurance on Acuvue factory producing contact lenses.
    f) Salary of a supervisor overseeing production of circuit boards at Acer.
    g) Insurance on IBM's Corporate Headquarters.
    h) Commission paid to Encyclopedia Britannica salespersons.
    i) Depreciation of factory lunchroom facilities at a General Electric plant.
    j) Steering wheels installed in Volvo's.
    Classify each cost as bring either variable or fixed with respect to the no of units sold. Also
    classify each cost as either a selling and administrative cost or a product cost.
    BBMC 1113 Management Accounting

    Part (B)

    1) "A variable cost is a cost that varies per unit of product, whereas a fixed cost is constant per
    unit of product." Do you agree ? Explain.

    2) ‘Over time or over a specific range of activity, some costs tend to be unaffected by the level of
    output, whereas others will change as output changes’.

    Required:

    Explain, with a relevant example each, the following cost classifications:

    (i) Variable cost;

    (ii) Fixed cost;

    (iii) Mixed cost (Semi variable). (Past Year Question, May 17)

    3) A company has the following data for the total costs and production levels over two
    consecutive periods:

    Period Units produced Total costs (RM)


    1 8,500 39,750
    2 12,000 55,500

    Required:

    Calculate the total fixed cost using the high-low method.

    4) The total cost of production for two levels of activity is as follows:

    Level 1 Level 2
    Production (units) 3,000 5,000
    Total cost (RM) 6,750 9,250

    The variable production cost per unit and the total fixed production cost both remain constant in
    the range of activity shown.

    What is the variable production cost per unit ? (Ans: RM1.25 )

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