Accounting 9706 · AS & A Level · Activity based costing (ABC)
Activity based costing (ABC) — practice question
The quotation says that what matters is the reason for a cost, rather than whether that cost is fixed or variable. Haruka Limited makes one product only and runs for 5 days each week over 50 weeks in a year, with one batch of 200 units made each day. Overheads come to $79000 a year.
(a)[1]
State the costing method referred to in the quotation.
(b)[2]
Find the overhead cost per unit, giving your answer to two decimal places.
(c)[12]
Produce an analysis that shows how the total overhead cost per unit from part (b) is divided among each of the individual overheads.
(d)[10]
Advise Samir on whether he should keep asking for this analysis in future years or not. Support your answer by weighing up the advantages and disadvantages of this costing method.
Worked solution & mark scheme
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