Quiz 9 & 10

Question 1

Activity based costing (ABC) is considered by some to be better than traditional absorption costing because it is:

Answer 1

More accurate

-Harder to understand and carry out and more expensive as more time consuming

Question 2

Proponents of ABC claim that traditional absorption costing:

Answer 2

Overstates the cost of high volume products

Question 3

In a management accounting context, AMT stands for:

Answer 3

Advanced manufacturing technology

Question 4

Another name for a cost pool is:

Answer 4

A cost centre

Question 5

The first stage in the design of an ABC system is to:

Answer 5

Identify the major activities which take place within the organisation

Question 6

State a characteristics of contract costing:

Answer 6

Customer-driven production

Question 7

A company operates a job costing system. Job 812 requires £60 of direct materials, £40 of direct labour and £20 of direct expenses. Direct labour is paid £8 per hour. Production overheads are absorbed at a rate of £16 per direct labour hour and non-production overheads are absorbed at a rate of 60% of prime cost.
What is the total cost of Job 812?

Answer 7

£272

Direct materials		£60
Direct labour			£40
Direct expenses		£20
Prime cost			£120
Prod overheads 
(5 hrs [£40 dir labour/£8 per hr] x £16 per hr
 or 2 x £40 - £16 is 2xhrly lab rate)	£80
Non production overheads
(60% x £120)			£72
					£272

Question 8

A company operates a job costing system. Job number 506 requires £64 of direct materials and 7 hours of direct labour. Direct labour is paid £8 per hour. Production overheads are absorbed at the rate of £20 per direct labour hour and non-production overheads at a rate of 60% of prime cost.
What is the total cost of job number 506?

Answer 8

£332

Direct materials		£64
Direct labour(7hrs x £8)	£5 6
Prime cost			£120
Production overheads
(7hrs x £20)			£140
Non production overheads
(60% x £120)			£72
					£332

Question 9

Which of the following industries would most likely use a job costing 	system?
	A	Frozen food
	B	Motor
	C	Chemical
	D	Building

Answer 9

D Building

Job costing system is for one off products not likely to be repeated

Question 10

Job costing is only applicable to service organisations. True of false?

Answer 10

False

Job costing not just apply to service organisations

Question 11

Batch costing can be used when a number of identical products are manufactured together to go into finished stock. True or false?

Answer 11

True

Batch costing exists where quantities of identical products are made in a batch and the whole batch is treated as a job