ABC - FI MCQs Q

ACCA F5 Question Bank Tuition questions: 1: Specialist cost and management accounting techniques 3
PART 1 TUITION QUESTIONS: Objective test and Scenario
1: Specialist cost and management accounting techniques
Activity based costing

1 RDE plc uses an activity based costing system to attribute overhead costs to its three products.
The following budgeted data relates to the year to 31 December 20X8:
Product X Y Z
Production units (000) 15 25 20
Batch size (000 units) 2.5 5 4
Machine set up costs are caused by the number of batches of each product and have been
estimated to be $600,000 for the year.
Calculate the machine set up costs that would be attributed to each unit of Product Y to the
nearest $0.01.
2
Fir Co
According to ABC, which of the following is the correct statement of the hierarchy of levels of
st I pyri
activity within an organisation, ranked from the bottom upwards?
Facility
sustaining
ntu ght
Product itio
n2
Product
017
sustaining
Batch
3 For which one of the following costs might the number of production runs be a cost driver?
 Production scheduling
 Product development costs
 Short-run variable overhead costs
 Materials handling and despatch costs
4 Tuition questions: 1: Specialist cost and management accounting techniques ACCA F5 Question Bank
4 KY makes several products including Product W. KY is considering adopting an activity-based

approach for setting its budget. The company’s production activities, budgeted activity costs
and cost drivers for next year are given below.
Cost driver
Activity $ Cost driver quantity
Set up costs 200,000 No. of set ups 800
Inspection / quality control 120,000 No. of quality tests 400
Machines are reset after each batch. Quality tests are carried out after every second batch.
The budgeted data for Product W for next year are:
Direct materials $2.50 per unit
Direct labour 0.03 hours per unit @ $18 per hour
Batch size 150 units
Budgeted production 15,000 units
Calculate, using activity based costing, the budgeted total production cost per unit for Product W
to the nearest $0.01.
DUFF CO
h t 7
r i g 2 0 1
The following scenario relates to questions 5-9. Each question is worth 2 marks.
y
Duff Co manufactures three products X, Y and Z. Each product uses the same materials and the same
p ion
type of direct labour but in different quantities. For many years Duff Co has been using full absorption
o
C uit
costing and absorbing overheads on the basis of direct labour hours, but is considering switching to
activity-based costing (ABC).
n t
The following data relates to the three products.
I
rs t Product X
20,000
Product Y
16,000
Product Z
22,000
Fi
Direct material cost ($ per unit) 25 28 22
Direct labour (hours per unit) 2.5 3 2
Direct labour cost ($ per unit, @ $12 per hour) 30 36 24
Machine hours per unit 1.5 1.25 1.4
Batch size (units) 500 800 400
Number of purchase orders per batch 4 5 4
Duff Co also expects to incur the following indirect costs.
Cost pools
$
Machine set up costs Number of batches 280,000
Material ordering costs Number of purchase orders 316,000
Machine running costs Number of machine hours 420,000
General facility costs Number of machine hours 361,400
1,377,400
5 Calculate the budgeted full production cost per unit of product X using Duff Co’s current
method of absorption costing, to the nearest $0.01.
$
ACCA F5 Question Bank Tuition questions: 1: Specialist cost and management accounting techniques 5
6 Calculate the total material ordering costs for Product Y to the nearest $.
7 Calculate the machine running and general facility costs per unit for Product Z to the nearest
$0.01.
8 Calculate the budgeted full production cost per unit of product X using ABC, to the nearest
$0.01, on the basis that total overheads allocated to Product X under activity-based costing are
$492,824.
9 Which TWO of the following statements about ABC are correct?

 ABC is only useful for production overheads.
 ABC is most useful when overheads are related to volume.
 ABC is an absorption costing system.

Fir Co
ABC must be based on activities that are measurable in quantitative terms.
Target costing st I pyri

10 ntu ght
The selling price of Product X is set at $350 for each unit and sales for the coming year are
expected to be 500 units.
itio
n2
A return of 30% on the investment of $300,000 in Product X will be required in the coming year.
What is the target cost for each unit of Product X?
$
017
11 A company has calculated that the target cost for Product Z is $40 per unit. This is based on an
expected production and sales volume of 3,000 units. The company wishes to earn a profit of
25% on sales.
What market price is the target cost for Product Z based on (to two decimal places)?
 $10.00
 $30.00
 $50.00
 $53.33

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ACCA F5 Question Bank Tuition questions: 1: Specialist cost and management accounting techniques 3

PART 1 TUITION QUESTIONS: Objective test and Scenario

1: Specialist cost and management accounting techniques

Activity based costing

4 KY makes several products including Product W. KY is considering adopting an activity-based

9 Which TWO of the following statements about ABC are correct?

Target costing st I pyri

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