AAT L2 Costing 03 Cost Centres and Overhead Absorption

Which cost is associated with - Profit centre

• Selling and marketing the products in a retail shop

• Mixing, filling and packing the sausages

• Storage in freezers in the warehouse

Identify the Tax cost centre

• Payroll software for paying salaries and wages

• Annual purchase of software updated for the year's finance act for the tax advisors

• Subscription to an audit advice helpline

Farm Ltd processes bacon and other meat products. It has a factory warehouse and a shop which sells the products. Look at the costs below and match them to Production cost centre.

• Selling and marketing the products in the retail shop.

• Mixing, filing and packing the sausages.

• Storage in freezers in the warehouse

Farm Ltd processes bacon and other meat products. It has a factory warehouse and a shop which sells the products. Look at the costs below and match them to Profit centre.

• Selling and marketing the products in the retail shop.

• Mixing, filing and packing the sausages.

• Storage in freezers in the warehouse

Which statements are true?

• Profit centre is a section of the organisation to which costs can be charged, income can be identified and profits can be calculated.

• Investment centre is a section in a business which does not process the costs, but income can be identified and investment can be measured.

• Absorption means incorporating indirect costs (overheads) into costs of units of output.

• OAR Overhead absorption rate is used to absorb overheads into products or services.

Methods of absorption used in businesses include:

• units of output method

• alpha-numeric method

• direct labour hours method

• machine hours method

• investment method

Which is the 'units of output' method of absorption?

• a method (OAR) of absorption rate based on absorbing overheads into products or services.

• a method of absorption based on dividing budgeted overheads by budgeted number of units to provide an overhead absorption rate per unit.

• a method of absorption based on dividing budgeted overheads by budgeted direct labour hours to provide an overhead absorption rate per direct labour hour.

• a method of absorption based on dividing budgeted overheads by budgeted machine hours to provide an overhead absorption rate per machine hour.

Which is the 'machine hours' method of absorption?

• a method (OAR) of absorption rate based on absorbing overheads into products or services.

• a method of absorption based on dividing budgeted overheads by budgeted number of units to provide an overhead absorption rate per unit.

• a method of absorption based on dividing budgeted overheads by budgeted direct labour hours to provide an overhead absorption rate per direct labour hour.

• a method of absorption based on dividing budgeted overheads by budgeted machine hours to provide an overhead absorption rate per machine hour.

Which is the 'direct labour hours' method of absorption?

• a method (OAR) of absorption rate based on absorbing overheads into products or services.

• a method of absorption based on dividing budgeted overheads by budgeted number of units to provide an overhead absorption rate per unit.

• a method of absorption based on dividing budgeted overheads by budgeted direct labour hours to provide an overhead absorption rate per direct labour hour.

• a method of absorption based on dividing budgeted overheads by budgeted machine hours to provide an overhead absorption rate per machine hour.

(Embed H&S)

COSHH signs are usually which colour?

• red and white

• blue and white

• green and white

• orange and black