Accounting 9706 · AS & A Level · Traditional costing methods

Traditional costing methods — practice question

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?

  • Aoverheads $\$950000$, cost per unit $\$4.75$
  • Boverheads $\$1000000$, cost per unit $\$5.00$
  • Coverheads $\$1040000$, cost per unit $\$4.16$
  • Doverheads $\$1040000$, cost per unit $\$5.20$

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