Costing - Study Mode
[#596] Costs of issuing purchase orders, making of delivery records for tracking payments and costs of inspection of items are classified as
Correct Answer
(B) ordering costs
Explanation
Solution: Costs of issuing purchase orders, making of delivery records for tracking payments and costs of inspection of items are classified as ordering costs. Ordering costs are the expenses incurred to create and process an order to a supplier.
[#597] Relevant ordering costs are added into relevant carrying costs to calculate
Correct Answer
(A) relevant total costs
Explanation
Solution: Relevant ordering costs are added into relevant carrying costs to calculate relevant total costs. Relevant cost is a managerial accounting term that describes avoidable costs that are incurred when making business decisions.
[#598] If purchase order lead time is 35 minutes and number of units sold per time is 400 units, then reorder point will be
Correct Answer
(A) 14000 units
Explanation
Solution: Reorder point = Number of units sold × Purchase order lead time = 400 × 35 = 14000 units
[#599] Relationship between cost and cost drivers is
Correct Answer
(B) not stationary
Explanation
Solution: Relationship between cost and cost drivers is not stationary. A Cost Driver is that factor or variable which has a cause and effect relationship with the total cost. The cost driver is the 'cause' and the 'cost incurred' is the effect of it.
[#600] Cost function, in which cost does not change with any change in level of activity is a part of
Correct Answer
(D) step cost functions
Explanation
Solution: Cost function, in which cost does not change with any change in level of activity is a part of step cost functions. A step cost is a cost that does not change steadily with changes in activity volume, but rather at discrete points.