BS1270 Topic 8A Review Quiz

Q1. In absorption costing, which method of cost classification is used?

• Fixed and variable

• Direct and indirect

• Product and period

• Relevant and irrelevant

Q2. Which of the following best describes absorption costing?

• The accumulation of direct costs which can be identified with a particular batch of products

• The accumulation of direct costs and production overheads which is applied in the costing of inventory

• The calculations involved in working out the costs attributable to a particular cost centre

Q3. A company with electricity metres in each of its cost centres would assign its electricity overheads using which of the following?

• Apportionment

• Allocation

• Absorption

• Accumulation

Q4. How are overhead absorption rates calculated?

• Divide overheads by direct costs

• Divide overheads by activity levels e.g. labour hours, machine hours

• Divide activity levels by e.g. labour hours, machine hours by overheads

• Divide direct costs by overheads

Q5. In order to calculate total production cost per unit, production overheads absorbed by each unit is added to which of the following?

• Indirect cost per unit

• Selling and administration cost per unit

• Direct cost per unit

• Factory cost per unit

Q6. Which of the following would be the most appropriate basis for apportioning the costs of running a factory canteen?

• Number of items produced

• Factory floor area

• Machinery net book value

• Number of factory employees

Q7. Hanley Ltd allocates direct materials and labour costs to specific jobs. Job 1387 has been undertaken to produce 950 units of product. The job will use: 330kg of material X at £25.35 per kilo, 150hrs of direct labour at £7.15 per hr (grade 6), 40.5 hrs of direct labour at £8.30 per hr (grade 7). In addition, a royalty of £2.50 per unit is payable to the product designer. What is the direct cost per unit of production?

• £9.47

• £10.29

• £11.57

• £12.79

Q8. Nagri Machines Ltd produces a single product. The company’s management accountant had budgeted the following totals in respect of the next financial year:

 

                                                £

Direct materials                     683,850

Direct labour                          552,400

Direct expenses                     92,000

Production overheads           888,700

 

Machine hours for the year are estimated at 863,000. If each unit requires 1 machine hour, what is the estimated indirect costs absorbed by each unit?

• £1.03

• £1.14

• £1.38

• £1.49

For Activity 1 Question 1 (Thomas Tank Ltd), what was the amount of overheads for the Machining cost centre?

For Activity 1 Question 1 (Thomas Tank Ltd), what was the amount of overheads for the Assembly cost centre?