Distinct types of cost accounting system

QUESTION 1 (15 Marks)

1. There are two distinct types of cost accounting systems: job order costing systems and process costing systems. How does management decide whether to use a job order costing system or a process costing system in any given manufacturing situation? Explain briefly.

QUESTION 2 (10 Marks) Product cost vs. period cost

2. Briefly define the terms product cost and period cost.

QUESTION 3 (18 Marks) Indicate whether each of the following is a product cost or a period cost:

3.1. Cost of flour in a cupcake shop =

3.2. Costs of delivering finished boats to dealers =

3.3. Cost of a store detective in a retail establishment =

3.4. Electricity for lighting purposes in a production facility =

3.5. Cost of nuts to a sweets producer =

3.6. Depreciation of a coffee machine in an coffee beans facility=

3.7. Salary of a pastry chef in a bakery =

3.8. Salary of a sewing machine operator in a coat making factory =

QUESTION 4 (20 Marks)

4.1. Define and explain economies of scale.

4.2. Provide an example of a company that illustrates good economies of scale

QUESTION 5 (15 Marks)

5.1. Provide a personal example in your own life of a fixed cost

5.2. Provide a personal example in your own life of a variable cost

QUESTION 6 (12 Marks) Under- and over-applied overhead

6.1. What is meant by under-applied overhead?

6.2. What is meant by over-applied overhead?

QUESTION 7 ( 10 Marks)

7.1. Why is it important to know each unit cost of an item, when you manufacture the item?

7.2 What is margin of safety?