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

Activity based costing (ABC) — practice question

Refer to Source B in the insert.
(a)[4]

State the steps a manufacturing business would follow to apply ABC.

(b(i))[7]

Calculate, to two decimal places, the unit selling price of each product using the following method of assigning overhead costs: the existing method.

(b(ii))[7]

Calculate, to two decimal places, the unit selling price of each product using the following costing method for assigning overhead costs: ABC.

(c)[7]

Advise the directors on whether ABC should be used for the coming year. Justify your answer.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: Divide the overheads into cost pools.

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