ABC Ltd makes widgets. It has no opening inventory and the closing inventory is 500 units. The budgeted and actual fixed manufacturing costs are $1,000 and the budgeted and actual production is 2,000 units.

The variable manufacturing cost was $2 per unit and the selling price was $8 per unit. Sales commissions of 4.5% of sales revenue are paid to sales people.

Other non-manufacturing fixed costs total $500.

What is the difference in profit between variable and absorption costing?

Select one:

$1,000

$250

$750

$500

Which of the following statements is true?

Select one:

Activity-based costing cannot significantly improve product cost accuracy where there is significant product diversity.

Activity-based costing can significantly improve product cost accuracy where overhead costs are a large proportion of total costs.

In recent decades Direct Labour has increased as a proportion of total manufacturing costs in many manufacturing businesses.

Under traditional costing, product cost distortions will be highly significant if overhead costs are a small proportion of product cost.

The key distinction between variable and absorption costing is the timing of fixed manufacturing overhead becoming an expense

Select one:

True

False

David Hasselhoff company starts work on 1000 physical units (Kitts) and completes 75 per cent of conversion activity. The costs are $1500 for conversion and $5000 for direct material. What is the cost per equivalent unit for direct material?

Select one:

$5.00 per unit

$6.67 per unit

$6.00 per unit

$10.00 per unit

Which of the following is NOT a factor that helped lead to the development of Activity Based Costing?

Select one:

Increased levels of competition, meaning it is more important to charge the 'correct' price.

Increased proportions of non-manufacturing costs

Decreased levels of non-volume-driven manufacturing overhead costs.

Increased computing power to deal with complexity of ABC calculations.

Assume that the direct cost per smartphone is:

Direct material $60

Direct labour $35

Assume that the factory where the phones are made is also used to make tablets and the annual costs of the factory (rent, insurance, maintenance etc) are $8 million.

The factory is expected to make 200,000 smartphones and 100,000 tablets in the year. It takes 2 hours to make a smartphone and 4 hours to make a tablet.

How much of this $8 million cost should be allocated to each smartphone made?

Select one:

$10

$40

$20

$15

A cost pool is:

Select one:

the primary function of a responsibility accounting system.

the joint result of several subunit activities.

a collection of costs to be assigned.

a performance report of the lowest level manager.