Traditional costing methods

A company gave the information below: opening inventory $100$ units at $\$2.00$ per unit; a further receipt of inventory of $400$ units at $\$2.10$ per unit; and $200$ units issued to production. The company uses the first in first out (FIFO) method for valuing inventory. What is the material cost of the units issued to production?

Feb/March 2016

Each month, a production centre uses $20000$ machine hours and $17000$ labour hours. Which formula is applied to work out the overhead absorption rate?

Feb/March 2016

The data given are as follows: overheads budgeted $60000$, actual $66000$; direct labour budgeted $30000$ hours, actual $35000$ hours. The overhead absorption rate is calculated using direct labour hours. What amount of overhead is over-absorbed or under-absorbed?

Feb/March 2016

A business makes and sells watches. During 2015, 4000 watches were produced and 3600 watches were sold. Further details for the year were as follows: direct materials $\$60$ per unit; direct labour $\$80$ per unit; variable selling expenses $\$15$ per unit; fixed manufacturing overheads $\$45$ per unit; fixed administrative costs $\$50$ per unit. What is the cost of goods sold for 2015 if the business uses absorption costing?

Feb/March 2016

For one period, a business recorded the following budgeted and actual figures. Budgeted fixed overheads are $\$354\,000$, actual fixed overheads are $\$360\,000$, and under-absorption of overheads amounts to $\$3\,000$. The fixed overheads are absorbed per unit. The budgeted number of units were 118000. What is the actual level of activity in units?

Feb/March 2016

When FIFO is used, how is the inventory held in stores valued?

Feb/March 2017

The business uses machine hours as the basis for absorbing overheads. For the most recent quarter, the budgeted and actual figures were as follows. Actual overheads: $118505$ Actual machine hours: $6230$ Budgeted overheads: $126725$ Budgeted machine hours: $6850$ Find the amount by which overheads were over-absorbed or under-absorbed.

Feb/March 2017

The following information is given for a company. Budgeted overheads: $136000$ Budgeted labour hours: $10568$ Actual overheads: $146000$ Actual labour hours: $10110$ Calculate the overhead absorption rate per labour hour?

Feb/March 2017

Miu runs a manufacturing business that produces one product only.

Feb/March 2017

Which type of business would make use of a job costing system of accounting?

Feb/March 2018

Which statements concerning absorption costing are correct?

Feb/March 2018

K Limited operates two production departments, one making bicycles and the other scooters. The information given is used to work out costs and selling prices.

Feb/March 2018

The following information was given for a business. Budgeted overheads $127000 Budgeted machine hours $10450 Actual overheads $149000 Actual machine hours $9300 What was the absorption rate per machine hour?

Feb/March 2019

A company allocates its overheads using machine hours. The information below refers to one month. Overheads: actual $237010$, budgeted $253450$ Machine hours: actual $12460$, budgeted $13700$ Which statement about overheads is correct?

Feb/March 2019

A business added a mark-up of $25\%$. Which statement is true?

Feb/March 2020

A manufacturer applies the weighted average cost (AVCO) method to value inventory. The opening inventory amounted to $10$ units at $50$ each. Over the month: $30$ units were bought for $70$ each. $20$ units were sold for $80$ each. What was the inventory value at month end?

Feb/March 2020

Why could absorption costing be used?

Feb/March 2020

The following details are given for a business. Budgeted fixed overheads $180000$ for $10000$ hours. Actual fixed overheads $190000$ for $11000$ hours. What was the over-absorption or under-absorption of fixed overheads?

Feb/March 2020

Cuthbert owns a manufacturing business with two production departments and one service department. The business allocates and apportions overhead expenditure across the production and service departments.

Feb/March 2020

A firm adds the following quantities of raw material to inventory. 120 units at $38$ per unit, giving a total of $4560$ 100 units at $40$ per unit, giving a total of $4000$ 60 units at $44$ per unit, giving a total of $2640$ It then issued 240 units. Inventory is valued by the weighted average (AVCO) method. What was the closing value of inventory?

Feb/March 2021

In March, a company had an overhead absorption rate of $2$ per machine hour. In April, this rate went up. What had risen in April and led to the change in the overhead absorption rate?

Feb/March 2021

A business allocates its overheads using machine hours. The information below is given. Overheads (actual): $564000$ Overheads (budgeted): $560000$ Machine hours (actual): $6700$ Machine hours (budgeted): $7000$ By how much are overheads under or over-absorbed?

Feb/March 2021

A company operates two departments in its factory. The information is given below: Machining department: budgeted fixed overheads $180\,000$, budgeted hours $6\,000$. Assembly department: budgeted fixed overheads $90\,000$, budgeted hours $10\,000$. Determine the fixed overhead absorption rate per hour in the machining department?

Feb/March 2022

What situation would lead to overheads being over-absorbed?

Feb/March 2022

R Limited applies absorption costing at one of its factories. The factory contains two production departments, Machining and Assembly, together with two service departments, Support and Canteen. Certain budgeted overheads have already been apportioned for April 2022. The outstanding budgeted overheads are Depreciation of machinery $25000 and Production departments’ supervisor’s wages $19800.

Feb/March 2022

An estimated job cost sheet listed these figures: materials $\u00050680$, labour at $\u0005020$ per hour $\u00050200$, overheads at $\u0005010$ for each labour hour $\u00050100$, profit $\u00050280$, and price of job $\u000501260$. In reality, the job required $25\%$ more labour hours than had been estimated. What profit was actually made?

Feb/March 2023

Which basis would be the most appropriate for allocating power costs between two production centres?

Feb/March 2023

A manufacturing business produces only one type of product. It operates two production departments, machining and assembly. A maintenance department supplies services to the production departments. The budgeted data for these departments are listed as follows: machining overheads $\u00050800000$ with $200000$ production units; assembly overheads $\u00050400000$ with $50000$ production units; maintenance overheads $\u00050300000$. The business applies a cost per unit rate to absorb overheads. Maintenance department overheads are allocated to production departments according to output. Which figures are correct for the machining department?

Feb/March 2023

The budget for a job uses the following information: direct materials $04800$, direct labour $02200$, and machine hours $240$. Direct labour is paid at $011$ per hour. Production overheads are allocated at $025$ for each direct labour hour, and selling and distribution overhead is worked out as $20\%$ of factory cost. What is the total cost of the job?

Feb/March 2023

A company operates two production departments, manufacturing and assembly, together with a stores service department. Overheads are to be apportioned to each department by using the costing data provided: direct labour hours-manufacturing $8400$, assembly $33600$; machine hours-manufacturing $20160$, assembly $6720$; total cost of the stores department $032800$; number of store requisitions-manufacturing $3000$, assembly $2000$. Calculate the overhead absorption rates for the two production departments for the stores.

Feb/March 2023

A production run of soft drinks has a direct materials cost of $10 000 for 50 000 cans. It needs 60 direct labour hours, with direct labour costing $40 per labour hour. Overheads are absorbed at 250% of the direct labour cost. Calculate the cost per soft drink can, to the nearest dollar.

Feb/March 2024

What is one benefit of absorption costing?

Feb/March 2024

The following figures are predicted for the coming month: opening inventory: 20 300 units closing inventory: 22 500 units marginal cost profit: $90 600 absorption cost profit: $100 400 What is the overhead absorption rate for each unit?

Feb/March 2024

X Limited has forecast monthly overheads of $125 000. Its overhead absorption rate is $5 per machine hour. In July, overheads were under-absorbed by $1000. Which differences from the budgeted figures caused this outcome?

Feb/March 2024

K Limited applies absorption costing at one of its factories. The product made there passes through two production departments: the cutting department and the finishing department.

Feb/March 2024

On 1 March, the business held 3 items of inventory, and each item had cost $8$. The business values inventory using the FIFO method. The following transactions took place in March: Purchases: - 10 March: 16 units at $7$ each - 18 March: 14 units at $6$ each Issues: - 27 March: 24 units at $10$ each What was the value of inventory at the end of March?

Feb/March 2025

A business applies absorption costing. Which costs are allocated to production?

Feb/March 2025

The figures below relate to a business: - budgeted direct labour hours: $20\,000$ - budgeted overheads: $300\,000$ - actual direct labour hours: $19\,000$ - under-absorption of overheads: $35\,000$ What amount of actual overheads was incurred during the period?

Feb/March 2025

An enterprise drew up its statement of profit or loss for its initial year of trading. Inventory was valued using marginal costing. The finance director now wishes to produce the statement with absorption costing. What impact will this change have on inventory valuation and on profit for the year?

Feb/March 2025

D Limited is a manufacturing business that uses absorption costing. Its factory contains two production departments, Cutting and Finishing, as well as two service departments, Stores and Canteen.

Feb/March 2025

A business has the following costs. 1 direct material and direct labour costs 2 indirect factory production overheads 3 administrative expenses 4 distribution costs Which of these costs are included when calculating cost per unit by using absorption costing?

May/June 2016

A company allocates overheads on the basis of machine hours. The information below is provided. Budgeted: overheads $200000; machine hours 40000 hours Actual: overheads $240000; machine hours 60000 hours What amount of over- or under-absorption of overheads occurred?

May/June 2016

Budgeted overhead expenditure stood at $180000$ and budgeted labour hours came to $12000$. In reality, overheads totalled $196000$ and labour hours were $12200$. What was the under or over absorption of overheads?

May/June 2016

A business has the following costs. 1 direct material and direct labour costs 2 indirect factory production overheads 3 administrative expenses 4 distribution costs When absorption costing is used, which of these costs are included in the cost per unit?

May/June 2016

A company applies overheads on the basis of machine hours. The information below is provided. Budgeted overheads are $200000 for 40000 machine hours. Actual overheads are $240000 for 60000 machine hours. Calculate the over or under absorption of overheads.

May/June 2016

Bruna Limited is a manufacturing firm. It runs three production departments and two service departments.

May/June 2016

The inventory information for a company is given below: Inventory on 1 January 2016: $100$ kilos at $100$ per kilo (total cost $10000$). Purchases in January 2016: $200$ kilos at $105$ per kilo (total cost $21000$). Purchases on 1 February 2016: $300$ kilos at $110$ per kilo (total cost $33000$). $400$ kilos were still held as inventory at the end of February 2016. The company applied FIFO when valuing its inventory. What was the inventory value at the end of February?

May/June 2017

A company has divided its costs among different departments, as set out below. Allocated costs: Production department 1: $80\,000$ Production department 2: $60\,000$ Maintenance department: $10\,000$ Distribution of maintenance department costs: Production department 1: $60\%$ Production department 2: $40\%$ Direct labour hours: Production department 1: 20\,000 hours Production department 2: 8000 hours What is the overhead absorption rate per labour hour for production department 1?

May/June 2017

A business ran a staff canteen, and the overhead cost was $12\,000$. Which apportionment basis would be the most suitable for this overhead cost?

May/June 2017

A business allocates some of its overhead expenses to its production departments. Why might building maintenance costs be left out of the other overheads that are being allocated?

May/June 2017

The data for a business are shown below. Budgeted manufacturing overhead $234\,000$ Budgeted direct labour hours 45,000 Actual manufacturing overhead $243\,600$ Actual direct labour hours 42,000 Calculate the amount by which overhead was under- or over-absorbed.

May/June 2017

Jamal values his inventory using the AVCO system. He gives the information below: March 1: there was no opening inventory March 6: 60 units were bought at $120 per unit March 17: 100 units were bought at $116 per unit March 23: 110 units were sold for $150 per unit What was the cost of sales for March?

May/June 2017

A company provides the following figures for August: budgeted machine hours: 36000 budgeted overheads: $162000 actual machine hours: 36500 actual overheads: $155000 Calculate the under or over absorption of the overheads?

May/June 2017

The company’s profits, when calculated using marginal costing and absorption costing principles, were the same. Which statement is correct regarding the company’s production units?

May/June 2017

A business values inventory by using the AVCO method. The information given is as follows. August 1: inventory of $6$ units at $14.40$ each August 4: bought $9$ units at $18.40$ each August 6: sold $5$ units at $20.20$ each What was the cost of the goods sold?

May/June 2017

A company uses direct labour hours to determine the overhead absorption rate. What causes over-absorption?

May/June 2017

A business recorded the following inventory transactions. 1 March opening inventory: 20 items at $7.50 each 3 March sales of inventory: 12 items at $9 each 6 March purchases of inventory: 18 items at $8.20 each What is the cost per unit of closing inventory on 7 March by using the AVCO (perpetual) method?

May/June 2018

How do you calculate an overhead absorption rate per machine hour?

May/June 2018

A baker gets a single order for $350$ loaves of bread. Which costing method should the baker use?

May/June 2018

A business values its inventory by using the AVCO method. On 1 June 2017, the inventory consisted of 100 units, each worth $2.40. The following events occurred. June 5: 40 units were purchased at $2.50 per unit June 7: 60 units were sold at $3.50 per unit What was the value of the inventory on 8 June 2017, correct to the nearest dollar?

May/June 2018

The budgeted figures below are available for a hotel in the next financial year. fixed overheads: $192000 direct costs: $240000 number of guests: 2400 average length of stay per guest: 4 nights What is the overhead absorption rate for each guest night?

May/June 2018

For 20000 units, the direct material cost is $8000. Direct labour takes 400 hours and costs $6000. Overheads are absorbed at 150% of the cost of direct labour. What is the cost per unit?

May/June 2018

A business allocates some of its overhead expenses among its production departments. Why could building maintenance costs be left out of the other overheads that are being allocated?

May/June 2018

The information below is given for a manufacturing business. What might result in under-absorption of overheads?

May/June 2018

A business makes two products during January. Overheads are absorbed by means of the direct labour hour rate. The production information is shown below. Product P: units manufactured and sold $5000$, direct labour hours for each unit $1.5$. Product Q: units manufactured and sold $2000$, direct labour hours for each unit $1$. Direct costs for the month totalled $23750$. The fixed overheads amounted to $6500$. What was the overhead absorption rate?

May/June 2018

A chemical plant manufactures a batch of 50 000 units. Direct materials cost $400 000. Direct labour amounts to 1000 hours at a cost of $60 000, and overheads are absorbed at $60 per direct labour hour. What is the cost of one unit?

May/June 2018

A company applies a direct labour rate of $5.40 per hour for absorbing production overhead. Each unit of product made needs four direct labour hours. The information below is given for one period: Actual production overhead = $518 400. Under absorbed production overhead = $32 400. What was the actual output during the period?

May/June 2018

Zinan manufactures one product only and currently applies marginal costing. The budgeted figures below cover two years.

May/June 2018

SP Limited owns a hotel and leisure centre. The business is organised into three operating divisions: Accommodation, Leisure and Conferences, plus one service centre: Support. Budgeted cost and cost centre information for the year ended 31 March 2018 is provided.

May/June 2018

A company values its inventory using the weighted average cost (AVCO) method. The details below are given for one inventory item. February 1: Opening balance, $20$ units at $4$ each February 14: Bought, $40$ units at $5$ each April 1: Bought, $40$ units at $8$ each May 22: Issued, $55$ units What was the overall cost of the units that were issued?

May/June 2019

A factory has a large workforce who pack a range of products for various customers. What would be the most suitable basis for absorbing the packing department overheads?

May/June 2019

Use the information below. Budgeted overhead cost = $60000$ Actual overhead cost = $66000$ Budgeted direct labour hours = $30000$ Actual direct labour hours = $35000$ Overheads are absorbed using direct labour hours. Calculate the amount of over absorption or under absorption of overheads?

May/June 2019

A trader wants to decide on a selling price. How is a mark-up applied?

May/June 2019

A business values its inventory using the First In First Out (FIFO) method. The inventory movements listed below occurred over one month, and there was no opening balance. 1 July: 100 units were received at $15.50; 6 July: 100 units were received at $15.60; 10 July: 80 units were issued; 20 July: 50 units were received at $15.80; 25 July: 100 units were issued. What was the inventory value at the end of the month?

May/June 2019

A business operates two production departments: assembly and machinery. The budgeted figures below are provided. Assembly: labour hours 5600; machine hours 1200; overheads $75000. Machinery: labour hours 1350; machine hours 6900; overheads $80000. Calculate the overhead absorption rate for the assembly department?

May/June 2019

The details below apply to one accounting period. Opening inventory: 40 000 units; closing inventory: 44 000 units; absorption cost profit: $284 000; marginal cost profit: $250 000. What was the overhead absorption rate per unit during the accounting period?

May/June 2019

A business applies the weighted average cost (AVCO) method to value inventory. On 1 September, 50 units were bought for $4.00 per unit. Then, on 10 September, a further 30 units were bought for $4.80 per unit. On 21 September, 15 units were sold. What was the cost per unit of the units sold?

May/June 2019

What could lead to the under absorption of overheads?

May/June 2019

A company has been requested to quote for printing 100 leaflets for a customer. Its total direct materials, direct labour and allocated overheads amount to $820, and 25% profit on cost has been added. Which costing method does this illustrate?

May/June 2020

The changes in a business’s inventory over a 3-month period are shown below. (date / units received / cost per unit / units issued) January: 100 units were received at $5; January: a further 200 units were received at $6; February: 50 units were issued; March: 200 units were issued. The business applies the first in first out (FIFO) method when valuing inventory. Calculate the value of inventory at the end of March.

May/June 2020

A company applies absorption costing using predetermined absorption rates. Which statement concerning absorption rates is correct?

May/June 2020

A business allocates fixed overheads on the basis of direct labour hours. The information below is given: (overheads: actual $525000, budgeted $525000; direct labour hours: actual 16300, budgeted 15000; indirect labour hours: actual 2700, budgeted 2500) Which statement is correct?

May/June 2020

The business gave the following details. budgeted overheads $20\,000$ budgeted direct labour hours $2000$ direct labour rate $20$ per hour A job used materials costing $45$ and $6$ hours of direct labour. Overheads are allocated according to the number of direct labour hours worked. What was the cost of the job before any profit was included?

May/June 2020

For what reason are service centre costs allocated to production departments?

May/June 2020

For July, the following figures were available for a department. direct labour hours: budget $40\,000$, actual $41\,950$ machine hours: budget $60\,000$, actual $60\,900$ overheads: budget $480\,000$, actual $499\,200$ What amount of overheads was over or under absorbed for July?

May/June 2020

A company has been asked to quote for printing 100 leaflets for a customer. The total of direct materials, direct labour and a share of overheads comes to $820$ and $25\%$ profit on cost has been added. Which costing method does this represent?

May/June 2020

The changes in a business's inventory over a three-month period are given below. Dates and receipts: - January: 100 units at $5 per unit - January: 200 units at $6 per unit - February: issues of 50 units - March: issues of 200 units The business applies the first in first out (FIFO) method for inventory valuation. What was the inventory value at the end of March?

May/June 2020

A company applies absorption costing using predetermined absorption rates. Which statement concerning absorption rates is correct?

May/June 2020

A business applies fixed overheads on the basis of direct labour hours. The information below is given: - Overheads: actual $525000, budgeted $525000 - Direct labour hours: actual 16300, budgeted 15000 - Indirect labour hours: actual 2700, budgeted 2500 Which statement is correct?

May/June 2020

G Limited makes celebration cakes. The business applies absorption costing.

May/June 2020

Which business would be likely to use a batch costing system?

May/June 2021

The information for a company’s fixed overhead in one period was: budgeted direct labour hours $5000$ actual direct labour hours $5500$ The total budgeted fixed overhead amounted to $50000$. Overheads over-absorbed during the period were $4000$. What was the actual fixed overhead incurred in the period?

May/June 2021

In what ways could under-absorption of overheads occur?

May/June 2021

A business applies absorption costing. What items are included in cost of sales?

May/June 2021

A business allocates its overheads using machine hours as the basis. The information given is as follows. Overheads: actual $960000$, budgeted $900000$ Machine hours: actual $6200$, budgeted $6000$ By how much were overheads under-absorbed or over-absorbed?

May/June 2021

The details below relate to direct materials for one month: Opening inventory: $1\,000$ kg at $20$ per kg Purchases: $20\,000$ kg at $22$ per kg Closing inventory: $3\,500$ kg Inventory is measured by the first in, first out (FIFO) method. What was the cost of materials issued to production during the month?

May/June 2021

In absorption costing, which costs are taken into account when working out cost of sales?

May/June 2021

A company has planned the following factory overheads for the next financial year. Machining and assembly are the production departments, while stores is the service department. The two production departments sent requisitions to stores as shown below: machining: 120 assembly: 80 overall: 200 What was the budgeted overhead absorption rate for the machining department, based on 4300 budgeted machine hours?

May/June 2021

T Limited produces goods in two factories, Factory A and Factory B. Factory A contains two production departments, Assembly and Finishing, as well as two service departments, Administration and Canteen. Absorption costing is used in this factory. The budgeted overheads for February 2021 have already been apportioned. The basis to use for reapportioning the service department overheads is as follows:

May/June 2021

A manufacturing business calculates its overhead absorption rate using direct labour hours. What causes over-absorption of overhead?

May/June 2022