Accounting 9706 · AS & A Level · Traditional costing methods

Traditional costing methods — practice question

F Limited is a manufacturing company that uses absorption costing at one of its factories. That factory includes two production departments and two service departments. The budgeted costs have already been allocated as well as apportioned.
(a(i))[2]

Explain the meaning of each of the following terms: Allocation.

(a(ii))[2]

Explain the meaning of each of the following terms: Apportionment.

(b)[1]

State one benefit of using absorption costing.

(c)[1]

State one limitation associated with absorption costing.

(d)[3]

Calculate the total overheads for each production department by reapportioning the service department overheads.

(e(i))[2]

Calculate the overhead absorption rate for the Assembly department to two decimal places.

(e(ii))[2]

Calculate the overhead absorption rate for the Finishing department to two decimal places.

(f)[3]

Calculate the under-absorption or over-absorption of overheads for April 2022 for the Assembly department.

Worked solution & mark scheme

This 16-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Overheads allocated to a specific cost centre” …

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