F5

Hi,

I just tried doing D10Q4. But the suggested ans seems to be wrong in part (a).

While calculating the OAR, they have only considered the direct labour hrs p.u and ignored the machine hrs p.u. Can’t it be argued that labour is required to run the machines and therefore while calculating the OAR the machine hrs p.u should be added to the labour hrs p.u to get the annual labour hrs p.u?

Please do not type out past exam questions – it is because they are copyright of the ACCA. I have the past questions and so just saying the number and the exam is enough 🙂

The examiners answer is completely correct.
The question specifically says that overheads should be absorbed on direct labour hours, and that means exactly what it says.

You have no idea how many workers run the machines and for how long. If they were to be regarded as direct labour then they will be already included in the direct labour hours per unit given in the question.

Have you watched my free lectures on ABC (which also go through traditional absorption costing)? The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.

Also, you can watch a lecture working through the whole of this question linked from the following page: https://opentuition.com/acca/f5/f5-revision-kit/

(In future please start a new thread when it is a new topic.)

No problem 🙂