Deck 10: Full Costing

Question 1

Use the information below to answer the following questions.
Jan runs a successful hairdressing salon in the CBD. The type of costs incurred in providing services to clients are:
i) Hairdressers' salaries
ii) Shampoo and Conditioner
(no individual records kept of usage)
iii) Colour and Perm Solutions
(individual records kept of usage per client)
iv) Electricity and Gas
v) Depreciation of equipment
Refer to the information above.The direct costs incurred in providing a perm to a client would be:

A) all costs mentioned above.
B) hairdresser salary, shampoo, and conditioner.
C) hairdresser salary, colour and perm solution.
D) hairdresser salary.

Answer 1

C

Question 2

The costing system used to assign costs to a distinct,identifiable job or service is called:

A) job costing system.
B) material control system.
C) process costing system.
D) average costing system.

Answer 2

A

Question 3

Use the information below to answer the following questions.
Jan runs a successful hairdressing salon in the CBD. The type of costs incurred in providing services to clients are:
i) Hairdressers' salaries
ii) Shampoo and Conditioner
(no individual records kept of usage)
iii) Colour and Perm Solutions
(individual records kept of usage per client)
iv) Electricity and Gas
v) Depreciation of equipment
Refer to the information above.The direct costs incurred in providing a haircut only to a client would be:

A) all costs mentioned above.
B) hairdresser salary, shampoo and conditioner.
C) hairdresser salary, shampoo and conditioner and electricity and gas.
D) hairdresser salary.

Answer 3

D

Question 4

Full cost represents:

A) only semi-variable costs.
B) variable costs.
C) both fixed and variable costs.
D) fixed costs.

Question 5

In full costing overhead,costs are:

A) economically identifiable with the cost object.
B) always fixed costs.
C) not economically identifiable with the cost object.
D) Both B and C.

Question 6

Use the information below to answer the following questions.
Jan runs a successful hairdressing salon in the CBD. The type of costs incurred in providing services to clients are:
i) Hairdressers' salaries
ii) Shampoo and Conditioner
(no individual records kept of usage)
iii) Colour and Perm Solutions
(individual records kept of usage per client)
iv) Electricity and Gas
v) Depreciation of equipment
Refer to the information above.The indirect costs incurred in providing a haircut only to a client would be:

A) all costs mentioned above.
B) shampoo and conditioner, electricity and gas.
C) electricity and gas and depreciation of equipment.
D) shampoo and conditioner, electricity and gas, and depreciation of equipment.

Question 7

A cost unit can be:

A) a product.
B) a department.
C) a job.
D) all of the above.

Question 8

Use the information below to answer the following questions.
Dan's Fencing constructs paling fences. During last month, the fencing division erected 4,000 metres of fencing. The costs incurred by the division were as follows:
$$\begin{array} { l r } \text { Palings } & \$ 4,000 \\\text { Posts } & \$ 5,000 \\\text { Nails (no usage records) } & \$ 500 \\\text { Cement (no usage records) } & \$ 500 \\\text { Wear and tear on equip. } & \$ 1,000\end{array}$$

-Refer to the table above.The full cost associated with constructing the 4,000 metres of fencing is:

A) $11,000.
B) $9,500.
C) $9,000.
D) $10,000.

Question 9

Which of the following statements is correct?

A) Full costing takes into account all resources sacrificed to achieve a specific objective.
B) Full costing only takes into account manufacturing costs.
C) Only variable costs are required to determine the selling price for a product.
D) Full costing cannot be used in the service industries.

Question 10

Although ________ costs are important in management decision-making,they cannot be directly related to individual cost units.

A) overhead
B) direct
C) material
D) fixed

Question 11

Full product costs comprise:

A) non-production costs only.
B) production costs only.
C) both production and non-production costs.
D) all costs except warrantee costs.

Question 12

The classification of a cost as either direct or indirect depends primarily on:

A) the computer tracing system within the organisation.
B) the definition of the cost object.
C) the knowledge of the accountant.
D) the type of business.

Question 13

The approach to deriving full costs in an operation where only identical products are produced is:

A) (total cost times percentage allocated to each unit) divided by total units.
B) total cost divided by total units.
C) (total units times percentage allocated to each unit) times total cost.
D) total units times total cost.

Question 14

A printing firm that produces newsletters,advertising brochures and other small documents for individual clients is operating what type of costing system?

A) Process costing.
B) Job costing.
C) Periodic costing.
D) None of the above.

Question 15

An overhead recovery rate represents:

A) a rate at which jobs will be charged with overheads.
B) a rate at which jobs are charged labour costs.
C) a rate at which jobs are charged to clients.
D) a rate at which jobs use overhead.

Question 16

The difference between selling price and profit is:

A) direct cost.
B) full cost.
C) variable cost.
D) fixed cost.

Question 17

Use the information below to answer the following questions.
Jan runs a successful hairdressing salon in the CBD. The type of costs incurred in providing services to clients are:
i) Hairdressers' salaries
ii) Shampoo and Conditioner
(no individual records kept of usage)
iii) Colour and Perm Solutions
(individual records kept of usage per client)
iv) Electricity and Gas
v) Depreciation of equipment
Refer to the information above.The indirect costs incurred in providing a perm to a client would be:

A) all costs mentioned above.
B) shampoo and conditioner, electricity and gas, depreciation on equipment.
C) shampoo and conditioner, electricity and gas, colour and perm solution.
D) shampoo and conditioner, electricity and gas.

Question 18

Use the information below to answer the following questions.
Dan's Fencing constructs paling fences. During last month, the fencing division erected 4,000 metres of fencing. The costs incurred by the division were as follows:
$$\begin{array} { l r } \text { Palings } & \$ 4,000 \\\text { Posts } & \$ 5,000 \\\text { Nails (no usage records) } & \$ 500 \\\text { Cement (no usage records) } & \$ 500 \\\text { Wear and tear on equip. } & \$ 1,000\end{array}$$

-Refer to the table above.The total direct costs incurred in erecting the 4,000 metres of fencing is:

A) $11,000.
B) $9,000.
C) $9,500.
D) $10,000.

Question 19

Use the information below to answer the following questions.
Dan's Fencing constructs paling fences. During last month, the fencing division erected 4,000 metres of fencing. The costs incurred by the division were as follows:
$$\begin{array} { l r } \text { Palings } & \$ 4,000 \\\text { Posts } & \$ 5,000 \\\text { Nails (no usage records) } & \$ 500 \\\text { Cement (no usage records) } & \$ 500 \\\text { Wear and tear on equip. } & \$ 1,000\end{array}$$

-Refer to the table above.The cost per metre of fencing is:

A) $2.25.
B) $2.75.
C) $2.50.
D) $2.38.

Question 20

Anything for which a separate measurement of cost is desired is called a:

A) cost unit.
B) job.
C) article.
D) fixed cost object.

Question 21

Use the information below to answer the following questions.
Fingers Ltd, a graphic design service, has received an inquiry from a potential customer for a quotation for a web-page design. The pricing policy of the business is based on the budgeted financial data for the coming financial year. The data for the coming year is shown below:
$$\begin{array} { l r } \text { Sales } & \$ 550,000 \\\text { Direct materials } & 40,000 \\\text { Direct labour } & 300,000 \\\text { Variable overhead } & 5,000 \\\text { Advertising for business } & 5,000 \\\text { Depreciation on equipment } & 30,000 \\\text { Administration } & 27,000 \\\text { Interest } & 10,000 \\\text { Profit before tax } & 133,000\end{array}$$ Other relevant information: Management has budgeted for 20,000 direct labour hours. Overhead is applied based on direct labour hours. An estimate for the direct costs of the job to be quoted on is shown below:
$$\begin{array} { l r } \text { Direct materials } & \$ 400 \\\text { Direct labour (100 hours) } & \$ 1,500\end{array}$$

-Refer to the table above.Total budgeted indirect costs for the year are:

A) $117,000.
B) $77,000.
C) $72,000.
D) $57,000.

Question 22

Osborne Ltd manufactures a wide range of leather suitcases. The following costs are expected to be incurred by the company during May: $$\begin{array} { l r } \text { Indirect labour cost } & \$ 28,000 \\\text { Direct labour time } & 10,000 \text { hours } \\\text { Depreciation on equipment } & \$ 20,000 \\\text { Rent and Rates } & \$ 13,000 \\\text { Direct labour costs } & \$ 98,000 \\\text { Heating, lighting and power } & \$ 4,000 \\\text { Machine time } & 8,000 \text { hours } \\\text { Indirect materials } & \$ 5,000 \\\text { Consumables } & \$ 2,000 \\\text { Direct materials used } & \$ 50,000 \\\text { Production estimate } & 1,000 \text { suitcases }\end{array}$$

-Refer to the table above.The full cost of producing the suitcases for May is:

A) $220,000.
B) $218,000.
C) $207,000.
D) $187,000.

Question 23

Nugyen Pty Ltd estimates its overhead costs will be $300,000 for the coming year and it will use 20,000 direct labour hours over the same period.How much overhead will be charged to a job that uses 23 direct labour hours?

A) $345.
B) $15.
C) $23.
D) $120.

Question 24

Which of these possible bases for allocating overhead costs is most commonly used in practice?

A) Direct labour cost.
B) Direct labour hours.
C) Machine hours.
D) Units produced.

Question 25

Use the information below to answer the following questions.
Fingers Ltd, a graphic design service, has received an inquiry from a potential customer for a quotation for a web-page design. The pricing policy of the business is based on the budgeted financial data for the coming financial year. The data for the coming year is shown below:
$$\begin{array} { l r } \text { Sales } & \$ 550,000 \\\text { Direct materials } & 40,000 \\\text { Direct labour } & 300,000 \\\text { Variable overhead } & 5,000 \\\text { Advertising for business } & 5,000 \\\text { Depreciation on equipment } & 30,000 \\\text { Administration } & 27,000 \\\text { Interest } & 10,000 \\\text { Profit before tax } & 133,000\end{array}$$ Other relevant information: Management has budgeted for 20,000 direct labour hours. Overhead is applied based on direct labour hours. An estimate for the direct costs of the job to be quoted on is shown below:
$$\begin{array} { l r } \text { Direct materials } & \$ 400 \\\text { Direct labour (100 hours) } & \$ 1,500\end{array}$$

-Refer to the table above.The recommended quote for the job is:

A) $2,285.
B) $2,460.
C) $2,195.
D) $2,485.

Question 26

Which of these is not another name for overhead costs?

A) Indirect costs.
B) Common costs.
C) Fixed costs.
D) None of the above, i.e., all are other names for overhead costs.

Question 27

If the overhead applied to a job is $600 and the overhead recovery rate is $15 per direct labour hour,how many direct labour hours were used for the job?

A) 900 hours.
B) 25 hours.
C) 30 hours.
D) 40 hours.

Question 28

Use the information below to answer the following questions.
Fingers Ltd, a graphic design service, has received an inquiry from a potential customer for a quotation for a web-page design. The pricing policy of the business is based on the budgeted financial data for the coming financial year. The data for the coming year is shown below:
$$\begin{array} { l r } \text { Sales } & \$ 550,000 \\\text { Direct materials } & 40,000 \\\text { Direct labour } & 300,000 \\\text { Variable overhead } & 5,000 \\\text { Advertising for business } & 5,000 \\\text { Depreciation on equipment } & 30,000 \\\text { Administration } & 27,000 \\\text { Interest } & 10,000 \\\text { Profit before tax } & 133,000\end{array}$$ Other relevant information: Management has budgeted for 20,000 direct labour hours. Overhead is applied based on direct labour hours. An estimate for the direct costs of the job to be quoted on is shown below:
$$\begin{array} { l r } \text { Direct materials } & \$ 400 \\\text { Direct labour (100 hours) } & \$ 1,500\end{array}$$

-Refer to the table above.If the budgeted direct labour hours change to 25,000 hours,what will be the revised quote?

A) $2,128.
B) $2,348.
C) $2,208.
D) $2,368.

Question 29

Ace Ltd makes trailers for boats.Management have decided they would like to implement a full cost recovery system as detailed below.
Direct materials and direct labour are the only costs that can be traced directly to jobs.All other costs will be recovered using an overhead recovery rate based on direct labour cost.Profit (mark-up)will be 12% of full costs.

REQUIRED:

A)Calculate the overhead recovery rate to apply overhead to jobs.
B)Provide a quotation (full cost estimate plus mark-up)for the following job.
An initial examination of the job identifies the following direct costs:

Question 30

Use the information below to answer the following questions.
Fingers Ltd, a graphic design service, has received an inquiry from a potential customer for a quotation for a web-page design. The pricing policy of the business is based on the budgeted financial data for the coming financial year. The data for the coming year is shown below:
$$\begin{array} { l r } \text { Sales } & \$ 550,000 \\\text { Direct materials } & 40,000 \\\text { Direct labour } & 300,000 \\\text { Variable overhead } & 5,000 \\\text { Advertising for business } & 5,000 \\\text { Depreciation on equipment } & 30,000 \\\text { Administration } & 27,000 \\\text { Interest } & 10,000 \\\text { Profit before tax } & 133,000\end{array}$$ Other relevant information: Management has budgeted for 20,000 direct labour hours. Overhead is applied based on direct labour hours. An estimate for the direct costs of the job to be quoted on is shown below:
$$\begin{array} { l r } \text { Direct materials } & \$ 400 \\\text { Direct labour (100 hours) } & \$ 1,500\end{array}$$

-Refer to the table above.The budgeted overhead recovery rate based on direct labour hours is:

A) $3.85 per DLH.
B) $5.60 per DLH.
C) $2.85 per DLH.
D) $5.85 per DLH.

Question 31

Use the information below to answer the following questions.
Whack Ltd, a tennis racquet manufacturer, has broken the production process into three lines, each in a different department: framing, stringing, and finishing. The following information relates to each department for the month of April:
$$\begin{array} { l l l l } & \text { FRAMING } & \text { STRINGING } & \text { FINISHING } \\\text { Direct Costs } & \$ 20,000 & \$ 30,000 & \$ 66,000 \\\text { Indirect Costs } & \$ 10,000 & \$ 20,000 & \$ 30,000 \\\text { Labour Hours } & 2,000 \mathrm { hrs } & 5,000 \mathrm { hrs } & 3,000 \mathrm { hrs } \\\text { Machine hours } & 500 \mathrm { hrs } & &\end{array}$$ Production for April is 10,000 racquets

-Refer to the table above.What is the total overhead for the organisation?

A) $30,000.
B) $10,000.
C) $20,000.
D) $60,000.

Question 32

An example of a service cost centre is:

A) finished goods department.
B) machining department.
C) payroll department.
D) assembly department.

Question 33

Osborne Ltd manufactures a wide range of leather suitcases. The following costs are expected to be incurred by the company during May: $$\begin{array} { l r } \text { Indirect labour cost } & \$ 28,000 \\\text { Direct labour time } & 10,000 \text { hours } \\\text { Depreciation on equipment } & \$ 20,000 \\\text { Rent and Rates } & \$ 13,000 \\\text { Direct labour costs } & \$ 98,000 \\\text { Heating, lighting and power } & \$ 4,000 \\\text { Machine time } & 8,000 \text { hours } \\\text { Indirect materials } & \$ 5,000 \\\text { Consumables } & \$ 2,000 \\\text { Direct materials used } & \$ 50,000 \\\text { Production estimate } & 1,000 \text { suitcases }\end{array}$$

-Refer to the table above.The management accountant at Osborne Ltd,wants to revise his estimates and use machine hours as the allocation base to determine the overhead recovery rate.The revised overhead recovery rate (rounded)per machine hour will be:

A) $4.88 per MH.
B) $9.00 per MH.
C) $7.38 per MH.
D) $8.75 per MH.

Question 34

A service business expects to incur overheads totalling $20,000 next month.The total direct labour time worked is 1,600 hours and total machine hours are 1,000.During next month,the business expects to do just two large jobs.Information concerning each job is as follows:

REQUIRED:

A)Calculate the overhead recovery rate for the month using direct labour hours.
B)Compute how much of the month's overhead will be charged to each job.

Question 35

Osborne Ltd manufactures a wide range of leather suitcases. The following costs are expected to be incurred by the company during May: $$\begin{array} { l r } \text { Indirect labour cost } & \$ 28,000 \\\text { Direct labour time } & 10,000 \text { hours } \\\text { Depreciation on equipment } & \$ 20,000 \\\text { Rent and Rates } & \$ 13,000 \\\text { Direct labour costs } & \$ 98,000 \\\text { Heating, lighting and power } & \$ 4,000 \\\text { Machine time } & 8,000 \text { hours } \\\text { Indirect materials } & \$ 5,000 \\\text { Consumables } & \$ 2,000 \\\text { Direct materials used } & \$ 50,000 \\\text { Production estimate } & 1,000 \text { suitcases }\end{array}$$

-Refer to the table above.The overhead recovery rate (rounded),using direct labour hours as the allocation base,is:

A) $3.90 per DLH.
B) $7.20 per DLH.
C) $5.90 per DLH.
D) $7.00 per DLH.

Question 36

Osborne Ltd manufactures a wide range of leather suitcases. The following costs are expected to be incurred by the company during May: $$\begin{array} { l r } \text { Indirect labour cost } & \$ 28,000 \\\text { Direct labour time } & 10,000 \text { hours } \\\text { Depreciation on equipment } & \$ 20,000 \\\text { Rent and Rates } & \$ 13,000 \\\text { Direct labour costs } & \$ 98,000 \\\text { Heating, lighting and power } & \$ 4,000 \\\text { Machine time } & 8,000 \text { hours } \\\text { Indirect materials } & \$ 5,000 \\\text { Consumables } & \$ 2,000 \\\text { Direct materials used } & \$ 50,000 \\\text { Production estimate } & 1,000 \text { suitcases }\end{array}$$

-Refer to the table above.Total indirect costs are:

A) $72,000.
B) $39,000.
C) $59,000.
D) $70,000.

Question 37

Service cost centre costs are assigned to:

A) individual customers.
B) corporate headquarters.
C) production cost centres.
D) units of output directly.

Question 38

When revenues and costs are dealt with on a departmental basis,each department is known as a:

A) cost centre.
B) overhead centre.
C) job centre.
D) collection centre.

Question 39

Use the information below to answer the following questions.
Fingers Ltd, a graphic design service, has received an inquiry from a potential customer for a quotation for a web-page design. The pricing policy of the business is based on the budgeted financial data for the coming financial year. The data for the coming year is shown below:
$$\begin{array} { l r } \text { Sales } & \$ 550,000 \\\text { Direct materials } & 40,000 \\\text { Direct labour } & 300,000 \\\text { Variable overhead } & 5,000 \\\text { Advertising for business } & 5,000 \\\text { Depreciation on equipment } & 30,000 \\\text { Administration } & 27,000 \\\text { Interest } & 10,000 \\\text { Profit before tax } & 133,000\end{array}$$ Other relevant information: Management has budgeted for 20,000 direct labour hours. Overhead is applied based on direct labour hours. An estimate for the direct costs of the job to be quoted on is shown below:
$$\begin{array} { l r } \text { Direct materials } & \$ 400 \\\text { Direct labour (100 hours) } & \$ 1,500\end{array}$$

-Refer to the table above.Total budgeted direct costs for the year are:

A) $345,000.
B) $340,000.
C) $375,000.
D) $300,000.

Question 40

An example of a product cost centre is:

A) corporate headquarters.
B) payroll department.
C) accounts payable department.
D) machining department.

Question 41

The formula for the overhead recovery rate using an activity-based costing system is:

A) overhead cost divided into relevant cost driver.
B) overhead cost divided by the number of products.
C) overhead cost divided into labour hours.
D) overhead cost divided by relevant cost driver.

Question 42

The following information is available on departmental overhead recovery rates for Major Manufacturing:
$\begin{array}{ll}\text { Machining Department } & \$ 47.50 \text { per machine hour } \\\text { Assembling Department } & \$ 16.90 \text { per direct labour }\end{array}$
How much overhead will be applied to job X 123 if it uses 13 machine hours and 20 direct labour hours?

A) $955.50.
B) $33.
C) $64.40.
D) $1169.70.

Question 43

The break-even price represents:

A) variable costs plus mark-up.
B) direct costs plus mark-up.
C) direct costs.
D) full costs.

Question 44

Use the information below to answer the following questions.
Whack Ltd, a tennis racquet manufacturer, has broken the production process into three lines, each in a different department: framing, stringing, and finishing. The following information relates to each department for the month of April:
$$\begin{array} { l l l l } & \text { FRAMING } & \text { STRINGING } & \text { FINISHING } \\\text { Direct Costs } & \$ 20,000 & \$ 30,000 & \$ 66,000 \\\text { Indirect Costs } & \$ 10,000 & \$ 20,000 & \$ 30,000 \\\text { Labour Hours } & 2,000 \mathrm { hrs } & 5,000 \mathrm { hrs } & 3,000 \mathrm { hrs } \\\text { Machine hours } & 500 \mathrm { hrs } & &\end{array}$$ Production for April is 10,000 racquets

-Refer to the table above.The direct unit cost per racquet for April is:

A) $17.00.
B) $9.60.
C) $16.70.
D) $11.60.

Question 45

In general,in recent times compared to the past,overhead as a percentage of a firm's total costs:

A) has decreased.
B) has remained the same.
C) has increased.
D) cannot tell

Question 46

At the time of the industrial revolution in Britain,the manufacturing sector was characterised by the following features,except for:

A) high use of technology.
B) a relatively uncompetitive market.
C) direct labour-intensive and direct labour-paced production.
D) a low level of overheads relative to direct costs.

Question 47

The focus in activity-based costing is on:

A) products.
B) direct costs.
C) services.
D) activities.

Question 48

Activity-based costing views overhead costs as:

A) the responsibility of each department.
B) unimportant in the development of full costs.
C) rendering service to cost units.
D) caused by activities which 'drive' the costs.

Question 49

All of the statements regarding activity-based costing are correct except:

A) it provides better information for decision-making.
B) it provides more accurate product costs.
C) it is used by the majority of businesses in Australia.
D) it is costlier than alternative systems.

Question 50

A cost centre through which jobs do not pass is known as a:

A) product cost centre.
B) service cost centre.
C) non-job cost centre.
D) administrative cost centre.

Question 51

Which statement concerning overhead costs is not true?

A) If overhead is segmented, say on a departmental basis, different bases can be used by the different departments to charge overhead to jobs.
B) There is no 'correct' basis for charging overhead to jobs.
C) It is possible to charge the overhead of one department to different jobs using different allocation bases.
D) None of the above, i.e., all are true statements.

Question 52

Use the information below to answer the following questions.
Whack Ltd, a tennis racquet manufacturer, has broken the production process into three lines, each in a different department: framing, stringing, and finishing. The following information relates to each department for the month of April:
$$\begin{array} { l l l l } & \text { FRAMING } & \text { STRINGING } & \text { FINISHING } \\\text { Direct Costs } & \$ 20,000 & \$ 30,000 & \$ 66,000 \\\text { Indirect Costs } & \$ 10,000 & \$ 20,000 & \$ 30,000 \\\text { Labour Hours } & 2,000 \mathrm { hrs } & 5,000 \mathrm { hrs } & 3,000 \mathrm { hrs } \\\text { Machine hours } & 500 \mathrm { hrs } & &\end{array}$$ Production for April is 10,000 racquets

-Refer to the table above.The overhead recovery rate for framing based on machine hours is:

A) $4.
B) $5.
C) $2.
D) $20.

Question 53

Activity-based costing is likely to be most beneficial to firms with which characteristics?

A) Has a multi-product range that use resources differently.
B) Manufactures a single product.
C) Has a multi-product range that use similar processes.
D) Is set-up as a public company.

Question 54

Which of these is an example of a product cost centre for a furniture manufacturer?

A) Human resources.
B) Assembly.
C) Accounting.
D) Canteen.

Question 55

Which of these are possible cost drivers under activity-based costing?

A) Number of deliveries.
B) Hours of storage of raw materials.
C) Number of set ups of machinery.
D) All of the above.

Question 56

Under both the traditional approach to full costing and activity-based costing,there is no difference in the:

A) total costs.
B) assignment of overhead costs.
C) unit cost.
D) Both A and B.

Question 57

By the end of the 20th Century,the manufacturing sector had fundamentally altered from the sector in the 1920s.The sector is now characterised by the following features,except for:

A) low levels of depreciation.
B) a highly competitive international market.
C) capital-intensive and machine-paced production.
D) a high level of overheads relative to direct costs.

Question 58

Use the information below to answer the following questions.
Whack Ltd, a tennis racquet manufacturer, has broken the production process into three lines, each in a different department: framing, stringing, and finishing. The following information relates to each department for the month of April:
$$\begin{array} { l l l l } & \text { FRAMING } & \text { STRINGING } & \text { FINISHING } \\\text { Direct Costs } & \$ 20,000 & \$ 30,000 & \$ 66,000 \\\text { Indirect Costs } & \$ 10,000 & \$ 20,000 & \$ 30,000 \\\text { Labour Hours } & 2,000 \mathrm { hrs } & 5,000 \mathrm { hrs } & 3,000 \mathrm { hrs } \\\text { Machine hours } & 500 \mathrm { hrs } & &\end{array}$$ Production for April is 10,000 racquets

-Refer to the table above.The overhead recovery rate for stringing and finishing based on direct labour hours is:

A) $6; $11.
B) $4; $10.
C) $10; $22.
D) $5; $ 3.

Question 59

Activity-based costing can be used in:

A) a non-profit organisation.
B) a service organisation.
C) a manufacturing organisation.
D) any of the above.

Question 60

When determining full costs the treatment of direct costs under activity-based costing:

A) is the same as under traditional costing.
B) relies upon identifying appropriate cost drivers.
C) must be related to activities.
D) Both B and C.

Question 61

Full costs are calculated in advance to assist management in:

A) determining profit during the year.
B) setting prices.
C) saving time at the end of the year.
D) Both A and B.

Question 62

Which of the following statements is incorrect?

A) Full costs are useful in decision-making, because this approach focuses on future costs.
B) The use of full costs is criticised, because it focuses on past costs.
C) Full costing can lead to incorrect decision-making, because it can distort figures.
D) Actual costs do not always follow the direction that the recovery rate may suggest.

Question 63

The approach to overhead costs under activity-based costing is that:

A) overheads provide service to cost objects.
B) overheads are caused by activities.
C) overheads happen.
D) overheads can be traced to cost objects.

Question 64

Both Australian and International standards require inventory to be valued at:

A) full cost.
B) variable cost.
C) manufacturing full cost.
D) direct cost.

Question 65

An advantage of activity-based costing compared to traditional costing is:

A) it is cheaper to implement.
B) overhead allocation is objective rather than arbitrary.
C) linking overheads to cost drivers results in a fairer and more accurate costing.
D) all of the above are advantages.

Question 66

Which of these is not a use of full cost information?

A) Pricing.
B) Income measurement.
C) Short-term decision-making.
D) None of the above, i.e., all are a use of full cost information.

Question 67

In a competitive market,a supplier will use which type of pricing approach?

A) Cost plus.
B) Target pricing.
C) Target costing.
D) Market price.