Chapter 4

Question 1

1. What is a startard cost cost?
2. Show the layout of one

Answer 1

Cards used to record budgeted costs for each product, It exists for each product ine that a company manafctures.

Question 2

Show and explain the income statement layout for marginal costing of inventory.

Answer 2

Question 3

Show and explain the income statement layout for absorption costing of inventory.

Answer 3

Question 4

Apart from the layout what is the only differnce between marginal and absorption costing shown on the income statement

Answer 4

Inventory value

Question 5

How is profit of marginal costing and absorption costing reconcilled?

Answer 5

Question 6

What is ‘activity based costing’? (ABC)

Answer 6

Costing that shares fixed production overheads to cost units based on the activitities the business undertakes as apose to production cost centres.

Question 7

A copany product tablets and phones, Using the ABC approach calculate..

1. OAR
2. Overhead absorption cost

Answer 7

Question 8

How is current contribution ratio calculated?

Answer 8

Total contribution / Total sales value

Question 9

Answer 9

Question 10

When comparing the profits reported under marginal and absorption costing when happens to profits when…

1. Inventory decreases
2. Inventory increases

Answer 10

1. Absorption costing profits will be lower than marginal costing profits.
2. Absorption costing profits will be higher than marginal costing profits.

Question 11

When comparing the closing inventory value reported under marginal and absorption costing when happens to profits when…

1. Inventory decreases
2. Inventory increases

Answer 11

Absoption costing increases irresective of inventory increase or decrease

Question 12

Answer 12