Chatper 9

Question 1

Activity based costing

Answer 1

1) Cost pool ( budgeted overhead ) / the total number of cost driver for all production

2) step 1 * to each own cost driver

• IF STATED PER UNIT for cost card you complete nromal method but then / by number of units to get price of one
• direct costs on cost card added normally e.g kg for one * price and hour * price

Question 2

Absorption costing

Answer 2

When asked to complete in traditional method before ABC

DIRECT COSTS = normal method add labour and material per unit

Production overhead = budgeted overhead total / (unit or labour hour or material amount )

In cases where it’s e.g. labour absorption method you just multiple the unit by labour hour to get activity for OAR

Question 3

Advantage of ABC

Answer 3

• provide more accaurate cost per unit than traditional
• shows the spread over where overheads have been used most in activities
• help control costs esp w tech increase

Question 4

Disadvantage

Answer 4

• can be difficult to find exact cost driver for cost pool
• time consuming and expensive