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PM Chapter 1 Questions Activity based costing

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    • The statement is saying that using ABC means that it results in having a good understanding of why overheads are occurring.
      This is true – as I explain in my lectures, it makes the company find out what is causing the overheads (the cost driver).

    • If you watch the example that I work through in my lecture, you will see that low volume products tend to have more costs than high volume products. ABC does allocate more or the overheads to low-volume products, but traditional absorption costing allocates the same unit cost to all of the products regardless of the volume of each.

      • Hi John,

        I must say i made the same mistake, i have answered this question as statement 2 only being correct. I think it may be the wording that has tripped me up, but below was my thought process:

        If you have 拢100,000 overheads and 2 products of say 800 and 200. Traditional would just split it 50/50, so 拢50,000 to each? Would this not therefore over-allocate overheads to the low volume and under-allocate to the high volume?
        If you have under-allocated surely you haven’t allocated enough, but in fact you have allocated too much?

  10. Hi Sir,

    Just wanted to thank you for the lectures and the test for chapter 1. I’m a returning student within ACCA and this has jump started my studies immensely. Looking forward to continue with the lecture notes and the revision kit afterwards. Out of curiosity, is there something I should look out for when presenting the results in the computer based exam setup? I have structured and linked my workings accordingly and making sure that they can be followed through easily however (since i’m not much of an imaginative person) it can become very long (especially in the workings section so you would go back and forth within the same sheet). What i did is that i set up the first columns in the spreadsheet with the answer and a second set of columns with the workings one following the other and referencing every line with the correct working section. Is there something else that the examiner would require out of me to make it easier for them to follow through and understand better my reasoning?

    Thanks in advance for your help and guidance 馃檪

    • In future please ask this kind of question in the Ask the Tutor Forum – not as a comment on a lecture or practice test.

      For sections A and B, your workings are not marked – only the answer – so it doesn’t matter how you do them.
      For Section C, it is the workings that are important and you get marks even if you make a mistake somewhere. How you show the workings does not matter, but time is an issue so you do not want to spend too long. Where possible set up formulae within the spreadsheet cells – the marker will be able to check what you have done. Best is to try the specimen exams on the ACCA website.

      • Am so grateful for helping me understand more of ABC..hoping for the best too in the rest of other chapters.God bless you tutor

  16. this is brilliant, love the lectures and the quiz but would this be enough to pass the exams with ofcourse revision kit and would i be easily to able to do activity based costing questions in the exam kit after taking the lecture and reading open tution notes?

  17. Thanks for the lecture and the quiz! I can see that some of the comments are a couple of years old which suggests that the quiz also is. I take it the material is still as relevant as then?

  18. Thank you Mr. John, this really jump-started my reading & understanding ABC. Though I could not easily & timely get the answers but was glad my reasoning returned & I was getting a bit confident. God bless u IJN

  20. In question 5, how can the second choice can be an advantage of ABC? Do ABC costing reduce the total overhead cost? I think it only allocates OH costs in more sensible ways than the traditional absorbtion costing.

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