Accounting 9706 · AS & A Level · Activity based costing (ABC)

Activity based costing (ABC) — practice question

Explorer Limited makes two products, Y and Z, and is thinking about adopting activity based costing (ABC).
(a)[4]

Compare the way overheads are apportioned under absorption costing and ABC.

(b)[7]

Calculate the cost per unit for each product by using absorption costing.

(c)[7]

Calculate the cost per unit for each product by using ABC.

(d(i))[4]

Compare the total profit made by each product under absorption costing and ABC.

(d(ii))[1]

Comment on the findings.

(e)[2]

Advise the directors whether ABC ought to be adopted or not. Support your answer.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: ABC is activity-led; costs are gathered in cost pools

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