WorksheetsQUIZ 2 Specialist cost and management accounting techniques
Total questions: 10
Worksheet time: 10mins
Which of the following statements about activity-based costing is/are TRUE?
1. It is not relevant for service industry businesses.
2. It is based on marginal costing principles.
A. 1 only
B. 2 only
C. Neither 1 nor 2
D. Both 1 and 2
The following have been suggested as advantages of using activity-based costing (ABC).
1. ABC is based on the idea that a single cost driver drives the cost behaviour of all items in the cost pool.
2. ABC enables a better understanding of what causes costs.
3. ABC helps the implementation of responsibility accounting.
4. ABC allocates more overheads to high-volume products.
Which of the above are advantages of using ABC?
A. 1 and 2
B. 1 and 3
C. 2 and 3
D. 2 and 4
The following statements have been made about life cycle costing:
1. It focuses on the short-term by identifying costs at the beginning of a product’s life cycle.
2. It identifies all costs which arise in relation to the product each year and then calculates the product’s profitability on an annual basis.
3. It accumulates a product’s costs over its whole life time and works out the overall profitability of the product.
4. It allocates costs to each stage of a product’s life cycle and writes them off at the end of each stage.
Which of the above statements is/are correct?
A. 1 and 3
B. 3 only
C. 1 and 4
D. 2
Payn Co is about to make an investment of $900,000 in manufacturing product 123. Payn Co’s board wishes to make a return of 25% on the investment in product 123 in the next year. Payn Co expects to sell 20,000 units of Product 123 for $40 per unit.
What is the target cost of Product 123?
A. $28.75
B. $30.00
C. $31.00
D. $32.00
Curtis runs a printing business. He estimates that his printing machine will need to be set-up 200 times per month, at a monthly total cost of $80,000. Item 2145 has to be printed in batches of 50 copies, where each batch requires the machine to be set-up twice. Curtis expects the annual demand for item 2145 to be 5,000 copies.
What amount should be charged to each copy of item 2145 for set-up costs (to the nearest $)?
(a)
The following statements have been made about Activity-Based Costing (ABC):
1. Introducing ABC will always reduce costs in the short term
2. If the cost of a product or service using both ABC and absorption costing is the same, there will be no benefit to be gained from adopting ABC
Which of the statements is/are correct?
A. 1 only
B. 2 only
C. Neither 1 nor 2
D. Both 1 and 2
Which THREE of the following statements about activity-based costing (ABC) and traditional costing systems (absorption costing and marginal costing) are correct?
A. No over-absorption or under-absorption of overheads can occur under ABC
B. ABC is useful for businesses which have high overheads in their cost structure
C. ABC is not suitable for use in businesses that provide services
D. Marginal costing understates the true cost of a product when compared to ABC
E. ABC is better than absorption costing in understanding what causes costs to be incurred
Which of the following statements about the theory of constraints is false?
A. It focuses on removing bottlenecks in production to improve throughput
B. Non-bottleneck resources should be operated at full capacity
C. It can be used in manufacturing and service organisations
D. It aims to reduce delays in meeting customer orders
The selling price of Product X is set at $550 for each unit, and sales for the coming year are expected to be 800 units. A return of 30% on the investment of $500,000 in Product X will be required in the coming year.
What is the target cost for each unit of Product X?
A. $385.00
B. $165.00
C. $187.50
D. $362.50
Which TWO of the following statements about target costing are true?
A. It cannot be used in services industries
B. It aims to achieve an acceptable margin in markets where a competitive market determines the selling price
C. It can be used in conjunction with lifecycle costing to achieve an acceptable lifecycle cost
D. It helps companies to achieve the sales price at which profits are maximised
