How often Activity-based costing is asked

Where it was asked

What costs marks here

The questions

1. Oct/Nov 2015, Q4.82 marks · multiple choice

   For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Identify which of the following is NOT associated with the activity-based costing method.

2. May/Jun 2015, Q5.92 marks · multiple choice

   Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. A fellow student has asked for the factors that likely contributed to the complex manufacturing environment that caused many companies to adopt activity-based costing (ABC) instead of traditional costing. The possibilities under consideration are: (i) wider product ranges; (ii) more overheads being driven by production volumes; (iii) increased dumping; and (iv) more focus on quality. Indicate the correct combination of factors.

3. Oct/Nov 2013, Q3(a)5 marks

   You work as a senior management accountant at Fabulous (Pty) Ltd, a profitable manufacturing company situated in Kempton Park. The Financial Director of Fabulous (Pty) Ltd asked you to attend a management accounting seminar on activity-based costing presented by Charl Hatt, a specialist in the field, and afterwards you feel equipped to help Fabulous implement activity-based costing. The company makes four products, C1, C2, C3 and C4, with respective output levels of 200, 250, 100 and 300 units, and machine hours per unit of 5, 4, 2,25 and 3 respectively. Production overheads for the period consist of machine department costs of R40 000, setup costs of R20 000, stores receiving of R15 000, inspection of R10 000, and material handling and dispatch of R25 000. For activity-based costing purposes the cost drivers are: machine hours for machine department costs (with the cost driver volume left blank, shown as '?'), number of production runs for setup costs (20 runs), requisitions raised for stores receiving (60 requisitions), number of inspections for inspection costs (50 inspections), and orders executed for materials handling (25 orders). Assuming that all production overheads are instead allocated to products on the basis of machine hours (not using activity-based costing), calculate the manufacturing overhead cost per unit of product C2.

4. Oct/Nov 2013, Q3(b)5 marks

   You work as a senior management accountant at Fabulous (Pty) Ltd, a profitable manufacturing company situated in Kempton Park. The Financial Director of Fabulous (Pty) Ltd asked you to attend a management accounting seminar on activity-based costing presented by Charl Hatt, a specialist in the field, and afterwards you feel equipped to help Fabulous implement activity-based costing. The company makes four products, C1, C2, C3 and C4, with respective output levels of 200, 250, 100 and 300 units, and machine hours per unit of 5, 4, 2,25 and 3 respectively. Production overheads for the period consist of machine department costs of R40 000, setup costs of R20 000, stores receiving of R15 000, inspection of R10 000, and material handling and dispatch of R25 000. For activity-based costing purposes the cost drivers are: machine hours for machine department costs (with the cost driver volume left blank, shown as '?'), number of production runs for setup costs (20 runs), requisitions raised for stores receiving (60 requisitions), number of inspections for inspection costs (50 inspections), and orders executed for materials handling (25 orders). Assuming that activity-based costing is now used, calculate an activity rate for each of the five activities: machine department costs, setup costs, stores receiving, inspection, and material handling and dispatch.

5. May/Jun 2013, Q1.52 marks · multiple choice

   Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. Mangaung Ltd is a Chinese conglomerate that recently opened an office in Johannesburg. Its CEO, Frelimo Mudau, has confided in you that he finds activity-based costing (ABC) difficult to understand, and has asked you, as a management accounting student, to explain the advantages and disadvantages of ABC. Consider the following statements: (i) performance measurement can be carried out in more detail owing to the extensive research required to implement ABC; (ii) ABC is less expensive than the traditional costing method; (iii) ABC may result in more accurate pricing decisions if costs are used to set prices; and (iv) if overhead cost is a low percentage of total cost, ABC will differ significantly from traditional costing. Which combination of these statements is true?

6. May/Jun 2013, Q1.62 marks · multiple choice

   Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. You have been given the following statements about activity-based costing (ABC): (i) ABC is more suitable for companies with larger amounts of indirect costs; (ii) the overhead rate will be the same regardless of whether ABC or traditional costing is used; (iii) under ABC, only manufacturing cost can be assigned to products; and (iv) the business process can be redesigned if inadequacies are identified during ABC research. Which combination of these statements is true?