Chap 3

Which of the following describes a cost centre?

• Units of a product or service for which costs are ascertained

• Amounts of expenditure attributable to various activities

• Functions or locations for which costs are ascertained and related to cost units for control purposes

• A section of an organisation for which budgets are prepared and control is exercised

Which of the following is a valid reason for calculating overhead absorption rates?

• To reduce the total overhead expenditure below a predetermined level

• To ensure that the total overhead expenditure does not exceed budgeted levels

• To attribute overhead costs to cost units

• To attribute overhead costs to cost centres

Which of the following is known as spreading common costs over cost centres on the basis of benefit received?

• Overhead absorption

• Overhead apportionment

• Overhead allocation

• Overhead analysis

The process of overhead apportionment is carried out so that

• costs may be controlled

• cost units gather overheads as they pass through cost centres

• whole items of cost can be charged to cost centres

• common costs are shared among cost centres

The following information is available for the two production departments (machining and assembly) and one service department (the canteen) at Wilmslow. Machining Assembly Canteen

Budgeted overheads £15,000 £20,000 £5,500

Number of staff 30 20 5
After reapportionment of the service cost centre costs, what will be the overhead cost of the machining department cost centre?

• £3,300

• £17,750

• £18,000

• £18,300

• A C

• B D

• A D

• B C

After the re-apportionment, the total overhead cost of the packing department, to the nearest £, will be

• £1,200

• £9,968

• £10,080

• £10,160

Which three of the following statements on the determination of overhead absorption rates are correct?

• Costs can be allocated where it is possible to identify which department caused them.

• Supervisors' salaries are likely to be apportioned rather than allocated.

• Costs need to be apportioned where they are shared by more than one department.

• There is no need for a single product company to allocate and apportion overheads in order to determine

• Apportionment always produces the correct result.

Which of the following bases of apportionment would be most appropriate for apportioning heating costs to production cost centres?

• Floor space occupied in square metres

• Volume of space occupied in cubic metres

• Number of employees

• Labour hours worked

What is the fixed overhead cost absorbed by a unit of Product B?

• £30.00

• £5.00

• £7.20

• £1.20