Management Accounting Techniques

Lordship Ltd has annual budgeted overheads of £15,000 and annual budgeted machine hours of 30,000. What is the budgeted overheads absorption rate?

• £0.50

• £0.55

• £0.65

• £2

The following terms relate to ABC concept except

• Marginal Cost

• Cost Driver

• Cost Pool

• Cost Driver Rates

Under-absorption is:

Debited to Profit and Loss Accounts

Credited to Overhead Control Accounts

• True

• False

Over-Absorption is

Debited to the Overheads Control Accounts

Credited to Profit and Loss Accounts

• True

• False

A company absorbs overheads on machine hours which were budgeted at 11,250 with overheads of £258,750. Actual results were 10,980 hours with overheads of £254,692. Overheads were ?

• Over-absorbed by £2,152

• Over-absorbed by £4,058

• Under-absorbed by £4,058

• Under-absorbed by £2,152

A factory produces a single product with the following budgeted costs: Direct materials £3.40 Direct labour £6.80 Variable overheads £1.20 Fixed overheads £340,000 Overheads are absorbed on the machine hour basis and it is estimated that in the next accounting period machine hours will total 100,000. Each unit requires two hours of machine time. What is the cost per unit using: (a) Marginal Costing, (b) using Absorption Costing

• a) £11.40

  b) £11.80

• a) £11.80

  b) £11.40

• a) £11.40

  b) £18.20

• a) £18.20

  b) £11.40

The difference between marginal costing profit and that of the absorption costing profit is usually the fixed cost included in the inventory valuation.

• True

• False

The break even point occurs when the Total Revenue is equal to the Marginal Cost

• True

• False

If break even point in Unit is 4,800 units and with budgeted sales being 5,000 units, calculate the margin of safety?

• 500 units

• -800 units

• 800 units

• 200 Units

With the same data as previous question, what is the margin of safety in percentage?

• 4%

• 40%

• 400%

• 0.4%