ADVANCE NABTEB ACCOUNTING*
1) Prime cost basically consists of direct cost of product i.e. direct material, direct labor and direct expenses. … Factory cost is calculated by adding the factory overhead to the prime cost. Factory cost is important for the purposes of stock valuation and setting price
2a) Gross profit is the profit a business makes after subtracting all the costs that are related to manufacturing and selling its products or services.
2b) Net profit is the measurement of a company’s profit once operating costs, taxes, interest and depreciation have all been subtracted from its total revenues. The term is often referred to as a company’s ‘bottom line’ and may also be described as ‘net earnings’ or ‘net income’.
2c) Average stock, or average inventory, is equal to stock at the beginning of the period plus stock at the end of the period divided by two. It represents the investment a business has made in its inventory.
2d) The cost of sales is the accumulated total of all costs used to create a product or service, which has been sold.
3) Subscription in arrears debited to the income and expenditure account and shown as an asset in the balance sheet while The subscription in advance is a liability because it is a future earning that will be due in the future, it means the company is owing outsiders the said amount tied to the payment.
4a) A break-even point is the point at which total cost and total revenue for a particular venture are equal. At the break-even point, an organization has recouped its costs but not yet made any profit.
4b) Variable costs vary based on the amount of output produced.
Variable costs may include labor, commissions, and raw materials.
Fixed costs remain the same regardless of production output.
Fixed costs may include lease and rental payments, insurance, and interest payments.