Full (Absorption) CostingMCQs Stds (DR21) (1)

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School

GC University Lahore**We aren't endorsed by this school

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FINANCE 12354V

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Accounting

Date

Dec 19, 2024

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Uploaded by arushmasaleem99

Full (Absorption) Costing Now test your understanding of “Full (Absorption) Costing” by attempting the questions below.1 For which ONE of the following uses is full costing usually considered most appropriate?a)Make or buy decisionsb)Income measurementc)Spare capacity usage decisions over the short termd)Profitability analysis where there is a scarce resource2 Which one of the following is the approach that is taken to full costing where all of the units ofoutput are identical?a)Process costingb)Uniform costingc)Standard costingd)Direct costing3 DMF Ltd manufactures smoke detectors and the following information is available for Model DMF/04:Per unitTotal direct cost£5Selling price£15Machine hours: production0.5Direct labour hours: inspection and packing0.1The following absorption rates are in use by the company:Production£4 per machine hourInspection and packing£10 per direct labour hourWhat will be the cost per unit of Model DMF/04 for inventories valuation purposes in the company’s published financial statements?a)£10b)£7.00c)£11d)£ 8.004 Lanning Ltd. operates a lawn maintenance service for those occupying houses in Totnes. The business incurred the following costs during the most recent month:£Depreciation – lawn mowers1,200Wages of gardeners1,8001

Wages of supervisor700Fertiliser400Rent of office and storage sheds1,000Repairs to lawn mowers100What are the total direct costs for the month for the purpose of calculating the cost of running thebusiness for a month?a)£2,300b)£2,200c)£2,600d)£5,2005 A company gives a quotation for a job which requires 85 kg of materials @ £9.30 per kg, 16 direct labour hours @ £35 per hour and overheads recovered on the basis of direct labour hours, at £15 per hour. A profit mark-up of 100 per cent is added. If the actual direct labour hours worked on the job were 20, what would the profit have been, assuming that the quoted price could not be renegotiated?a)£1,390.50b)£1,590.50c)£3,181.00d)£1,790.506 Which ONE of the following is an approach to costing that is appropriate where sets of products are produced and where each component of the set is identical or nearly identical, but each set is different?a)Process costingb)Full costingc)Batch costingd)Marginal costing7 Which ONE of the following best describes direct cost?A cost that:a)varies directly with outputb)can be directly measured in respect of each cost unitc)is directly relevant to the decision being maded)is directly related to the manufacturing process2

8 For a multi-product business, indirect costs should be apportioned on the basis of which one of the following?a)Equal shares between each type of cost unitb)The benefits received by each type of cost unitc)The quantity produced of each type of cost unitd)The profitability of each type of cost unit9 Due to the large proportion of this sector’s total cost is likely to be made up of overheads, activity-based costing (ABC) is most relevant to which ONE of the following broad business sectors?a)Servicesb)Car manufacturingc)Retailingd)Oil extraction10 Full costing is often supported on the grounds that it provides a useful guide to _________ costs.a)fixedb)opportunityc)economicd)long-run average11 In activity-based costing (ABC), costs are allocated into which one of the following?a)Cost poolsb)Cost centresc)Cost groupsd)Cost accounts12 Activity-based costing (ABC) differs from traditional absorption costing in the manner in which it treats which ONE of the following?a)Semi-variable costsb)Direct costsc)Variable costsd)Indirect costs3

13 CC Ltd. produces three products and absorbs production scheduling costs on the basis of the number of machine set-ups required, with one set-up being required per batch of output, regardless of which product is being produced. Estimated information for next year is given below:ProductABCOutput (units)10,000 20,000 20,000Units per batch5002,0001,000Production scheduling costs £50,000TOTAL NO. OF BATCHES = 50 COST PER BATCH = 50,000/50 = 1,000=1000 x NO. OF BATCHES IN A (20) = 20,000=20,000/10,000 = 2Using set-ups as the absorption basis, what is the production scheduling cost per unit of Product A?a)£2.00b)£1.00c)£5.00d)£0.254