MAF451

Week 2 Cost Classification

Answer All Questions

1. Identify the behavior of the following costs:

Cost	Fixed or Variable
Advertising cost
Sugar used in producing soft drinks
Store keeper salary
Salesman commission
Royalty paid to author of the book Cost and Management Accounting
Wages for production workers
Road tax paid for the company vehicles
Production manager salary

(5 marks)

2. CIMA defines cost as the amount of expenditure (actual or notional) incurred on, or attributable to, a specified thing or activity.

Required:

a. Explain briefly the following items.

i. Direct cost ii. Indirect cost iii. Conversion cost

(3 marks)

3. Cost accounting measures and reports information relating to the cost of acquiring and utilizing resources. Therefore, it is very crucial to distinguish between production cost and non-production cost for cost controlling.

Required:

Define production costs and non-production costs with two (2) examples of each term.

(4 marks)