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

Activity based costing (ABC) — practice question

Use Source B from the insert.
(a)[5]

Calculate, to two decimal places, the unit selling price for each product using the traditional method.

(b)[3]

State three conditions that ought to be met before a business may adopt ABC.

(c)[7]

Calculate the unit selling price for each product, to two decimal places, using ABC.

(d)[3]

Explain the difference in the unit selling price for each product as obtained in (a) and (c).

(e)[7]

Advise the directors on whether they should use ABC in the coming year or not. Justify your answer.

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