Management Accounting (MA) Costing Flashcards
6 cards from real ACCA AK practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Management Accounting (MA) Costing flashcards as text
A company produces a single product. Fixed production overheads for the period are £120,000 and budgeted output is 40,000 units. Actual output is 38,000 units. What is the fixed overhead volume variance under absorption costing?
Answer: £6,000 adverse
The overhead absorption rate is £120,000 ÷ 40,000 = £3 per unit. Actual output is 38,000 units, so absorbed overhead = 38,000 × £3 = £114,000. Variance = £114,000 − £120,000 = £6,000 adverse (under-absorption because fewer units were produced than budgeted).
Which of the following is a direct cost of producing a table?
Answer: Wood used in the table
A direct cost is one that can be specifically traced to a cost unit. Wood used in making a table is directly attributable to that table. Factory rent, supervisor salary, and machinery depreciation are indirect costs (overheads).
Under marginal costing, how are fixed production overheads treated?
Answer: Treated as a period cost and charged in full to the income statement
Under marginal costing, only variable production costs are included in inventory valuation. Fixed production overheads are treated as period costs and written off in full against revenue in the period they are incurred.
A product passes through two processes. The output of Process 1 becomes the input of Process 2. This is an example of which costing method?
Answer: Process costing
Process costing is used where production is continuous and products pass through a series of processes. The output of one process becomes the input of the next, and costs are averaged over units produced.
In absorption costing, if actual production exceeds budgeted production, what happens to fixed overheads?
Answer: They are over-absorbed
When actual production exceeds budget, more overhead is absorbed (actual units × OAR) than was actually incurred. This results in over-absorption — a favourable situation that increases reported profit.
What is the equivalent unit concept used for in process costing?
Answer: To convert partly completed units into an equivalent number of fully completed units for cost allocation
Equivalent units express partly completed work-in-progress in terms of fully completed units. For example, 200 units that are 50% complete equal 100 equivalent units. This allows accurate cost per unit calculations in process costing.