Maginal Costing and Absorption Costing

Costs incurred during production or while providing a service that cannot be traced directly and in full to

the product or service are known as ………………….., and the four main types of …………….. are

production, administration, ……………….. and distribution

The three stages of calculating the costs of overheads to be charged to manufactured output are as

follows: ………………………. ; ………………………. ; and ……………………….

Marginal cost is the ………………… cost of one unit of product or service. ……………… is the

difference between the sales value and the marginal cost of one unit of product or service.

The procedure whereby indirect costs (overheads) are spread fairly between cost centres is known as

………………………….. Service cost centres may be apportioned to production cost centres by the

……………………… method or by the .................... method of reapportionment.

……………-absorbed overhead occurs when actual overhead is less than absorbed overhead,

and therefore too …………….. overhead has been charged to production

Over-absorbed overheads occur when

• Absorbed overheads exceed actual overheads

• Absorbed overheads exceed budgeted overheads

• Actual overheads exceed absorbed overheads

• Actual overheads exceed budgeted overheads

Which of the following would be the most appropriate basis for apportioning machinery insurance costs

to cost centres within a factory?

• The number of machines in each cost centre

• The floor area occupied by the machinery in each cost centre

• The value of the machinery in each cost centre

• The operating hours of the machinery in each cost centre

Which of the following is correct when considering the allocation, apportionment and reapportionment of

overheads in an absorption costing situation?

• Only production related costs should be considered

• Allocation is the situation where part of an overhead is assigned to a cost centre

• Costs may only be reapportioned from production centres to service centres

• Any overheads assigned to a single department should be ignored