# ACCA F2 flashcards – set 2

### What is meant by an ‘incremental cost’?

Click to View the Question

An incremental cost is an extra cost (and is relevant for investment decisions).

### What is the Current Ratio?

Click to View the Question

The current ratio = current assets / current liabilities

### What are the four main elements that one would expect to appear in a Mission Statement?

Click to View the Question

The four main elements are:

• Purpose
• Strategy
• Culture
• Values

### Give possible reasons for an adverse material expenditure variance.

Click to View the Question

Possible reasons for an adverse material expenditure variance include:
– paying more than the budgeted price per unit of materials due to errors in purchasing
– a price increase in materials
– incorrect budgeting of the standard cost of materials

### What is meant by the ‘payback period’?

Click to View the Question

The payback period is the number of years it takes to get back the original investment, in cash terms.

### What is a ‘sunk cost’?

Click to View the Question

A sunk cost is a cost already incurred (and is not relevant for investment decisions)

### What are the purposes of budgeting?

Click to View the Question

Planning
Control
Co-ordination
Authorisation
Communication
Motivation
Evaluation

### How is the coefficient of determination calculated?

Click to View the Question

The coefficient of determination is the square of the coefficient of correlation.

### What is a ‘variable cost’?

Click to View the Question

A variable cost is one which varies in total with the level of activity.

### What is a ‘delivery note’?

Click to View the Question

A delivery note is included by the supplier with the goods, and lists the quantity of goods that are being delivered.

### In the formula on the formula sheet for the Economic Order Quantity, what does the symbol D represent?

Click to View the Question

D represents the total demand per year.

### What is meant by a piecework system of remuneration?

Click to View the Question

Employees are paid a fixed amount for each unit produced.

### Define the labour capacity ratio

Click to View the Question

Labour capacity ratio = Number of hours spent working / total hours available x 100%

### What is the symbol for the coefficient of correlation on the formulae sheet?

Click to View the Question

r is the coefficient of correlation

### What is meant by the ‘cost gap’ in the context of target costing?

Click to View the Question

The cost gap is the excess of the estimated actual cost over the target cost.

### What are the four main differences between the output of service and manufacturing businesses?

Click to View the Question

* Intangibility – the output of a service industry is performance rather than tangible goods.
* Perishability – a service cannot be stored
* Simultaneity – a service is received by the customer at the same time as it is delivered – it cannot be checked first.
* Heterogeneity – every service is likely to be different.

### What is meant by the term ‘by-product’?

Click to View the Question

A by-product is output from a process which has a low value relative to the main product(s) being produced in the process.

### What is the difference between a profit mark-up and a profit margin?

Click to View the Question

A mark-up is when the profit is calculated as a percentage of cost; a margin is when the profit is calculated as a percentage of selling price.

### Under what circumstances will the profit using marginal costing and the profit using absorption costing be the same?

Click to View the Question

The profits will be the same if there is no change in the level of inventory over the period (i.e. when the closing inventory is the same level as the opening inventory).

### What is the reason for a difference between the profit calculated under marginal costing principles and the profit calculated under absorption costing principles?

Click to View the Question

The difference is because of the difference in the way opening and closing inventories are valued. Under marginal costing they are valued at the marginal (variable) cost of production; under absorption costing they are valued at the full cost of production (variable plus fixed).

### What is meant by the word ‘contribution’?

Click to View the Question

The contribution is the profit before fixed costs (or the revenue less all variable costs).

### What is the difference between the allocation of overheads and the apportionment of overheads?

Click to View the Question

Allocation – whole cost items are charged to the relevant cost centre

Apportionment – cost items are shared/divided between several cost centres

• says

The flash cards cannot be downloaded – you can only use them online.

(But appreciate that they are notes to be used with the lectures – there is no sense really in using them without the lectures where we go through the examples and explain exactly what is happening.)

• says

Yes – the topics at F2 are all examinable again at F5. They are regarded as being deemed knowledge.

• says

You can only use this interactive revision on line

You can download the course notes – all information and lots more in the the notes –

• says

try another browser – or maybe your internet connection is slow?
make sure you have javascript enabled,