9706 · 2.1.1
Materials and labour flashcards
Revision flashcards for Cambridge 9706 Materials and labour (syllabus 2.1.1). Flip, recall, then mark a real past-paper question.
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FIFO issue price?
Oldest batch cost used first for issues.
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AVCO after receipt?
New average = (Old value + Receipt value) ÷ Total units.
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Direct labour?
Wages of workers directly making the product.
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Indirect labour?
Supervisors, stores — treated as overhead.
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Carriage in?
Added to purchase cost of materials.
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Trade discount?
Deducted from list price — not recorded separately.
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What is the formula for calculating the weighted average cost per unit in the AVCO method?
(Cost of inventory on hand + Cost of new purchase) / (Units of inventory on hand + Units of new purchase). This is calculated after each new purchase.
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How does FIFO value closing inventory during a period of rising prices (inflation)?
FIFO values closing inventory at the most recent, higher prices. This results in a higher closing inventory valuation on the statement of financial position compared to AVCO.
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Distinguish between direct labour and indirect labour.
Direct labour is the cost of workers directly making the product (e.g., assembly line worker) and is part of the prime cost. Indirect labour is the cost of workers supporting production (e.g., factory supervisor) and is a production overhead.
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What is the accounting treatment for a trade discount received on raw materials?
A trade discount is deducted directly from the purchase price of the materials at the point of purchase. It reduces the cost of the inventory recorded in the accounts.
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What is the 'piecework' system of labour remuneration?
A system where employees are paid a fixed rate for each unit of output they produce. It is an output-based payment method that directly links wages to individual productivity.
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What is the overtime premium?
The extra amount paid to an employee for working beyond their normal hours, calculated as the difference between the overtime rate and the basic rate of pay.
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How is the overtime premium typically treated in cost accounting?
It is usually treated as an indirect labour cost (a production overhead), unless the overtime was worked at the specific request of a customer to complete their job.
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What is a stores ledger card?
A perpetual inventory record that tracks the movement of each item of inventory, showing receipts, issues, and the running balance in terms of quantity, unit cost, and total value.
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What is idle time?
Time during which an employee is paid but is not productive, due to reasons like machine breakdown or lack of materials. The cost of normal idle time is usually treated as a production overhead.