Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Types of Costing
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John Moffat.
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- March 28, 2016 at 5:43 pm #308507
Sir, I have a few questions:
1) In which costing method the fixed cost is charged in the period in which units are sold?
A. Marginal costing
B. Absorption costing
C. Unit costing
D. Job costingI assume it’s A – Marginal Costing, but I don’t get the wording. In absorption costing, you also effectively ‘charge’ out the fixed (production overheads) costs for the units sold while the non-prod. fixed costs are fully written off in the period. What’s the correct answer?
2) Contract Costing is not specifically mentioned in the F2 syllabus, but I still see questions regarding it. For instance, is a ship builder likely to use contract costing? A question identified it as so. And will you also identify some other examples of contact costing, just in case? Thank you.
3) A plumber uses job costing, but I have found conflicting answers regarding what an ‘accountancy firm’ uses. In some places it said job costing while others stated service costing. Please help me out.
4) This statement, is it right?
“The costs of abnormal gains and losses are not absorbed into the cost of good output, but are shown as losses and gains in the process account.”5) Finally, when a question says ‘costs are absorbed into good units’, what does it really mean? Eg regarding normal losses, it is said that their costs ARE absorbed into that of good output. Then what about the abnormal losses? 1 unit = 1 Equivalent unit so I assume this means they DO retain their cost of production. Is that correct?
March 29, 2016 at 6:54 am #3085391. The answer is A. With absorption costing only the amount absorbed is charged in the current period – the remainder of the production fixed costs are carried forward in the value of inventory.
2. Contract costing is when it is a long-term contract and therefore the work is not completed within one accounting period. It is applicable to any work that takes several years to complete. Building planes would be another example.
3. Job costing and service costing are effectively the same when it comes to the arithmetic.
4. The statement is correct
5. Abnormal losses are not absorbed into the cost of good production – they are valued at the cost of good units.
April 7, 2016 at 12:07 pm #309223Dear Sir, thank you for all the help. 🙂
April 7, 2016 at 2:42 pm #309241You are welcome 🙂
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