Cost Accounting Quiz

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11 Questions

GHS120,000

7,550 units

GHS14

GHS615,000

GHS35,000

GHS694,075

Marginal costing

GHS4,000

GHS5,000

In a scenario where there is opening stock but no closing stock, what happens to profit under absorption costing compared to marginal costing?

Higher than marginal costing

Given the cost details for XYZ Company Ltd, how would you calculate the under or over-absorption of overheads for the second half of 2022?

Use a GHS362,250 under-absorption

Study Notes

Absorption Costing vs Marginal Costing

• If a company does not hold any opening or closing inventories, profits will be the same if either absorption costing or marginal costing is used.
• Absorption costing and marginal costing are two different methods of costing, with different approaches to handling fixed costs.

Costing and Production

• Total cost of producing 1500 units and 2500 units can be calculated using the given data.
• The total fixed cost can be calculated using the total cost of producing 1500 units and 2500 units.

Opening Stock and Closing Stock

• If there is opening stock but there is no closing stock, then profit under absorption costing will be higher than the marginal costing.

XYZ Company Ltd

• XYZ Company Ltd recorded the following cost for the first half of 2022: Selling Price per unit, Direct Material cost per unit, Direct Labour cost per unit, variable production cost per unit, Fixed production cost per unit, and direct expenses per unit.
• The company produced 7550 units and sold 7150 units during the period under review.
• The normal budgeted activity level per annum is 15600 units.

• Under or over-absorption of overheads can be calculated using the given data.
• The calculation takes into account the normal budgeted activity level per annum.

BDC Company Ltd

• BDC Company Ltd recorded the following cost for the first half of 2022: Selling Price per unit, Direct Material cost per unit, Direct Labour cost per unit, variable production cost per unit, Fixed production cost per unit, and direct expenses per unit.
• The company produced 7550 units and sold 7150 units during the period under review.
• The normal budgeted activity level per annum is 15600 units.

Marginal Costing Profits

• Marginal costing profits can be calculated using the given data.
• The calculation takes into account the normal budgeted activity level per annum.

Machine Hour Absorption Rate

• Machine hour absorption rate can be calculated using the given data.
• The calculation takes into account the budgeted machine hours and actual machine hours.

• Overhead absorption rate can be calculated using the given data.
• The calculation takes into account the budgeted overheads and actual overheads.
• The overhead absorption rate per hour can be calculated using the given data.

Test your knowledge of cost accounting concepts with these questions related to absorption costing, marginal costing, fixed costs, and production units. Determine the correct statements about profits and total fixed costs based on the given scenarios.

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