I got 60% which is not bad but i would like to know if there are other questions i can practise
J
John MoffatTutor·
We only have these short tests. You should really buy an Exam Kit from BPP or Kaplan - they are full of exam standard questions to practice.
R
Rija·
how can abc reduce total overheads?
J
John MoffatTutor·
It seems that you did not watch my free lecture before attempting this test because it is the most important reason for companies adopting ABC and I explain why in the lecture!!
Adopting ABC forces companies to examine why they are incurring the overheads, which can lead to greater efficiency and a reduction in the costs.
A
Anastasia·
Hi! Thank you for your lectures! Where can I find more excercise to practice ABC for ACCA? Thank you in advance!
J
John MoffatTutor·
You will some in the Study Hub on the ACCA website, but also it is best to buy a BPP Exam Kit - it contains lots of past exam (and other exam standard) questions.
A
Anastasia·
Hello! Thank you for the lecture! I do not understand how you calculate other overheads in Q3 . Where did you find 96000 and 115200 to calculate it? Thank you in advance!
J
John MoffatTutor·
The total labour hours for P are 2400 x 8 = 19200, and for Q are 9600 x 10 = 96000. In total it is 115200 hours.
G
Gift Khumalo·
What informed us that labour hours are the cost drivers for other overheads?
O
Oluwatosin·
first attempt 80%, though I am writing ICAN not ACCA
M
modupe·
for question 1, is ABC used in this? I thought it would be because cost driver is used in the text.
M
modupe·
or is it because it only says work out the set up costs for product X, so ABC doesn't need to be used?
J
John MoffatTutor·
Calculating the setup cost is using ABC. Basic absorption costing would simply spread the costs over the number of units.
S
Sasindu·
The second question asks which ones are true as per ABC. But the first statement is relevant to Traditional costing. So shouldnt the answer be only statement 2 ? Pls let me know....Thanks!
J
John MoffatTutor·
I guess the wording could be better - the statement is true but I agree that it is not really about ABC
R
Rachelle·
I also thought that statement 2 only was correct because the question is talking about ABC and not the traditional costing. Please clarify on this one
J
John MoffatTutor·
See my previous reply. The wording could be better - it should really be saying about traditional costing as compared with ABC
M
Martha·
Good practise
S
Siphokazi·
So glad I found Open Tuition, 100% first attempt yaay
A
Abeer·
Good practice
A
Abeer·
Good practise
P
pearson·
Am failing to view the lecture Videos ...what could be the problem.
J
John MoffatTutor·
Please ask in the 'technical problems' forum and admin should be able to help you.
https://opentuition.com/forum/technical-problems/
S
Swiss·
100% 1st Attempt. Off to a good start for the March Session
J
Jimoh·
Got 80% on first attempt
J
John MoffatTutor·
Great :-)
Y
yunus·
The quiz is very helpful and I am very grateful.
B
BRIGHT·
got 80% in first attempt
B
Bridgette·
Scored 100% on 1st attempt
K
kajal·
Do you think will get the same question from here? Does anyone have any experience?
J
John MoffatTutor·
You are likely to get similar questions in the exam but obviously they do not simply repeat questions! You need to buy a Revision Kit because it is full of exam questions for practice.
G
gufran·
Sir, I get 75% in your Mock exam so I can pass in ACCA original exam on march
L
Louise·
Thank you for the quiz... very handy ?
W
Wang·
Here is my calculation for question 3:
set-ups cost fot Q per unit?$33600*15/28/9600=$18.75
Insepection cost for Q per unit?$19200*3/8/9600=$7.5
other overhead cost for Q per unit: $230400/(2400*3+9600*10)=$2
so total overhead for Q per unit :$28.25
According to the quesiton, only other overhead are absorped by basic of labour hours,so it does not mean all the overhead have to be absorped by labour hour. who can tell me why my understanding is wrong ?
best regards
J
John MoffatTutor·
The 'other overhead costs' are $2 per labour hour. Each unit of Q takes 10 hours, so the labour cost per unit is 10 x $2 = $20.
C
chukwudi·
60% on first attempt but then again the statement choices were quite unclear at first
J
John MoffatTutor·
All these questions are past exam questions :-)
S
Simbarashe·
I scored 80 on first attempt
T
Thu·
I got confused at "Which is not an advantage of ABC?". I thought it won't reduce total overheads (because total overheads may stay the same, only more realictic costs apportionment) but the correct answer was "it may be impossible to allocate all overheads to specific activities". Can you please explain, Sir?
J
John MoffatTutor·
But I do explain this in detail in my free lectures - it is the main advantage of implementing ABC because it requires investigation of why overheads are being incurred.
M
Marian·
100% on first attempt. :)
R
Rahul·
80% in first attempt :-)
M
Muhammad Ameerul Afnan·
Hello, just wanna clarify on question 1.
Does it not necessarily need to use cost driver data related to "number of set-ups" when calculating the set up cost?
Because from the question and answer itself, it using data of production per units to get the set up cost per unit.
B
Bangura·
It's fine for a start because it gives you the opportunity to do more studies.
A
Anasthesis·
80 at first attempt
A
Aga·
Hi! Can you please explain why we're taking 96.000 in calculating other overheads no 9.600?
Thanks for the answer.
R
Rahul·
its because 9600 units x 10 labor hours as other overheads are absorbed basis number of labor hours
J
Jelisa·
In question 3 of 5 how do you get the number 115,200 ?
J
John MoffatTutor·
The total number of labour hours for P are 2,400 units x 8 = 19,200
The total number for Q are 9,500 x 10 = 96,000
So the total number of labour hours budgeted is 19,200 + 96,000.
J
Jelisa·
Thank you
A
Amandeep·
but then 9500X10 is 95000 where is the 96000
A
Amandeep·
ignore me just your typo
A
Ahmed·
80%
T
Talita·
I got 60% on my 1st quiz. Not what I expected but it's pretty good for a 1st timer I guess. Though the calculations are confusing
A
Abubukr·
There is a bit of confusion in this question. Which says which statement of the following about Activity Based Costing is true?
So statement number 1 is about (Traditional costing) and statement number two is about ABC, so answer 1 should be correct but not both as the first is about Traditional costing ??
J
John MoffatTutor·
No. This was a real exam question and the wording is fine. The first statement is a statement of fact that is comparing traditional absorption costing with absorbing the overheads using ABC principles.
P
Priscilla·
What do I do to improve on the theoretical questions? I failed all 3 questions.
J
John MoffatTutor·
Go back through all of our free lectures, work through every question in your Revision Kit, and ask in the Ask the Tutor Forum about anything you are not clear about in either the lectures on in the answers to your Revision Kit questions.
R
roshni·
Got 60% in first attempt for this, Getting confused with the calculation questions.
In question 3 how do you get 192000/8? how do you arrive at 8?
J
John MoffatTutor·
There are a total of 8 inspections (5 for P and 3 for Q)
L
Lee·
100% and full understanding and ability to apply ABC - the lectures were spot on.
Lee
I
Isaiah·
I got 60% on my first attempt, a little confusion on the theory questions 2 and 4. need to sharpen my craft there. Thanks.
J
John MoffatTutor·
:-)
D
David·
Hello sir,
In question 3, how do you get to 115,200?
Kind regards
J
John MoffatTutor·
The total number of labour hours is (2,400 x 8) + (9,600 x 10) = 115,200
S
Sandeep·
Thanks for the lectures sir, I got 80% in the Practice Tests.
J
John MoffatTutor·
Great :-)
C
Crimsimon·
Thanks for the lectures sir, I got 100% in the Practice Tests.
J
John MoffatTutor·
Great :-)
A
Anita·
Very helpful ?
J
John MoffatTutor·
Thank you :-)
N
Natalie·
Dear Sir,
For question 3, I wrongly match the cost driver of setup cost and other overhead costs; how can we identify or co-relate the overhead costs to each cost driver? It is because for Chaper 1 of example 1, each cost driver can easily match with each overheads cost.
J
John MoffatTutor·
The question specifically states that 'other overheads' are to be absorbed on the basis of labour hours.
Set-up costs are based on production runs as explained in the free lecture (but is helped anyway by the fact that inspection costs are obvious, and so there are only production runs left to choose :-) )
N
Natalie·
Thank you John, will be more careful.
J
John MoffatTutor·
You are welcome :-)
P
priyawaran·
Thank you for your amazing support to us.
Do you suggest we do the revision kit after every chapter?
wouldn't the questions have more parts that require other chapters?
M
Muhammad·
Referring to Question 2! How a traditional costing method could under-allocate overheads to low-volume product? The exercise we did earlier, we over-allocated overheads to product A due to which it turned out to be a loss-making, however, under ABC, we realised that it was not product A that was loss-making rather it was product C! kindly, shade some light on this query.
J
John MoffatTutor·
In the example that I work through in the lecture, the low volume product is product C (with only 2,000 units produced). Tradition absorption costing allocated few overheads to this product than when we used ABC - traditional absorption costing under-allocated the overhead costs to product C.
H
Hermela·
hello i dont understand why the fourth question is true for both statements. does ABC method has high cost than the benefit it gives for us?
K
KEVIN·
Yeh, sometimes the cost of implementing ABC is greater then benefits, which means the cost per unit is similar to Absorption costing, this might be because the the product is regular & does not specific activity included.
N
Nyasha·
Hello sir how is ABC costing method costly? I understand that it is time consuming but how does is become costly?
J
John MoffatTutor·
Mainly because of the time taken - that needs paying people to spend the time :-)
N
Nyasha·
Alright thank you sir
K
kabir000·
Can we have some more Questions like this please. I am an A level teacher and i am struggling with ABC costing.
J
John MoffatTutor·
No - our tests are only meant to be quick tests as students are studying. We make it clear that all need to buy a Study Text from one of the ACCA Approved Publishers because they are full of past exam and other exam standard questions.
H
helpfromjesus92·
The tutorial and the practice questions are really helpful and the doubt clarification by you sir to all the queries with much attention is extremely appreciable. Thank you so much sir... :)
J
John MoffatTutor·
Thank you for your comment :-)
L
Liya·
Sir I could not understand the 3rd question answer how in other overhead the amount 115200 came?
I did 230400/18*10= 128000
J
John MoffatTutor·
We use the total hours for each product (not the hours per unit).
So the total hours for P are 2,400 x 8 = 19,200, and for Q are 9,600 x 10 = 96,000. So in total 115,200 hours.
(It is the same idea as in the example I work through in my free lecture.)
L
Liya·
Okay sir. Got it
And 1 more question Sir,
In the first question after finding the cost per setup ,i.e., $1000
Next step can't we do $1000/ 1000 units?
And get $1.00/unit as the answer?
D
dessalegn·
hi.i can't see the question I have only see the comments
P
Pavan·
I don't have any questions but want to thank you for your goodness towards students
Please suggest me the best revision book
Thanks
J
John MoffatTutor·
Thank you for your comment.
BPP and Kaplan are the ACCA Approved Publishers and their books are both as good as each other. I myself have the BPP Revision Kit (and you can get a 20% discount from BPP if you click on the BPP link that is on most of the pages on our website).
C
Chaminda·
I calculated 'Q' unit cost correctly. But has given 'P' unit cost to answer.
Thank you Sir
J
John MoffatTutor·
I assume that you are referring to question 3.
The question asks for overhead the cost per unit of Q, and the correct answer is the overhead cost for Q which is $46.25.
M
mithekiller·
sir "number of inspection during production" is a bit confusing because it might refer to both "the number of inspection during the whole production" in which case total inspection will be 8 (3 + 5) but if it is assumed that "the number of inspection during each of the production run" which i did, the total inspections would be 110 (13*5+15*3). my question is how do we avoid these confusions because in some other instances if you dont assume the answer turns out wrong.
J
John MoffatTutor·
The cost is the total cost of all inspections and therefore the number of inspections needed is the total number.
Did you not watch my free lectures before attempting the test?
M
mithekiller·
i did watch the lecture before attempting the test, but i found the wording of the question a bit confusing. to state it simply how do we know the inspections are for the whole production and not for the individual production runs?
J
John MoffatTutor·
If it was as you were thinking then it would have said "number of inspections per production run". The fact it says number of inspections during production means the whole production (not per run) :-)
J
John MoffatTutor·
I do understand that sometimes the wording can confuse (especially when reading quickly because of the time pressure in the exam) but there is no rule I can give you as regards avoiding the confusion - it depends on the wording (this was a past exam question). Here, as I wrote before, it would have said production run if it was meaning the number of inspections per production run (and to have 5 inspections in each production run would seem rather unlikely anyway :-) )
M
mithekiller·
i got my answer. Thank you sir
R
ramisha·
in the last question it says which of the following is not an advantage of ABC, although all accept for 3rd are advantages but 3rd is a disadvantage.
when it says ''not an advantage'' doesn't necessarily mean that it would be a disadvantage.
in short the third option is a disadvantage
it is possible that if something is ''not an advantage'' it may not be a disadvantage either.
J
John MoffatTutor·
I assume that you are referring to the choice "it can lead to a reduction in total overheads" (which will not also appear as the third choice because the software deliberately changes the order).
If it is this statement that you are referring to, then it is certainly not a disadvantage. It is the main advantage of using ABC as I explain in my free lectures on this.
The correct answer is that "it may be impossible to allocate all overheads to specific activities" because it is a fact and is certainly not an advantage.
S
Ski·
My understanding is that the total of the overheads stays the same, just the allocation of the overheads to individual products changes. Or is it meant to say that the total of overheads allocated to individual products might reduce.
J
John MoffatTutor·
The calculations will not change the total overheads.
However, as I explain in my free lectures, the main benefit in practice for using ABC is that it forced the company to find out what is causing the overheads. That leads to using them more efficiently and results in a saving of overheads.
Again, I explain this in my lecture with examples.
M
Malavika·
Hello,
For the first question, while calculating the total cost for product X why is 20000 divided by 1000?
Also I am confused witht the second question, can someone please explain why both the statements are right?
N
Noman·
Malvi210, Keep one thing in your mind that when there is word batches in question then you must have to find number of batches. In this case, we will find number of batches by dividing 20000 with 1000.
J
John MoffatTutor·
What nomanashaf has written is correct for the first question.
As far as the second question is concerned, statement 2 is the definition of a cost driver as I explain in my free lectures on ABC.
Statement 1 is best explained by looking back at the example in the notes that I work through in my lecture. Product C is a much lower volume than the other 2 products. Using traditional absorption the overheads are $2.84 per hour whereas with ABC the overheads are $8.63. I do explain in the lecture why this has happened.
F
Francis·
Thanks so much. The tutorial has been extremely helpful.
J
John MoffatTutor·
Thank you for your comment :-)
P
PetrSupporter·
Hi everyone,
I am quite confused with the solutions in the task with products P and Q. In the feedback, you arrived to 46.25 (the same as I indicated as a correct answer, but it was marked as wrong answer, saying that the correct answer is 140.64. I am bit confused. Thank you in advance for clarifications!
J
John MoffatTutor·
I am puzzled because I have just checked the test again and it is marking 46.25 as being the correct answer.
Try reloading the page and trying the question again.
T
tanatswajc·
Hie
Could you please explain to me how you allocated other overheads on that question?
J
John MoffatTutor·
They have been absorbed on the basis of the labour hours.
K
kissme4560·
I got 100% for this quiz, Thank sir for your free lectures
V
valijon1993·
Hi Sir,
I got 80%.
The only question I got confused is Q2.
Could you please give an example or kind of deeper explanation on "How the traditional absorption costing tends to Under-Allocate OH cost to low-volume products"?
D
Dinh·
Dear Sir,
Could you please build bank of OT questions in order that I can pratice more ? At present, the same question appears each time I pratice.
Thank you.
J
John MoffatTutor·
Sorry but no.
You need to buy a Revision Kit from one of the ACCA approved publishers (BPP and Kaplan). They are full of past exam and other exam standard questions in the same format as those in the real exam.
D
Dinh·
Yes.Thank you for your advise.I wonder that whether there is some of OT question in the real exam be same as those in revision kit or same as past exam ?
J
John MoffatTutor·
I don't understand what you mean. Some of the questions in the real exam are similar to those in our tests.
A
Anyam·
Greetings sir. I think you made a mistake In q3. The answer should have been $39.30. Owing to the fact that you took 96, 000 units of Q instead of 9, 600 units in calculating the total other Overheads of Q. If you had used the right units which are 9, 600 units, the answer would have been. $39.30. I hope you review an given me feedback. Thanks in advance
J
John MoffatTutor·
There is no mistake. Other overheads are absorbed on the basis of labour hours and each unit of Q takes 10 hours. 9,600 units a 10 = 96,000 hours.
A
addisanopacourage·
Hi John
Thank you for the quiz. I can't figure out where we got the $115200 on overheads. Please assist.thank you
A
addisanopacourage·
Hi John
I found it, thanks
J
John MoffatTutor·
I am pleased that you found it :-)
A
Abdurrahman·
Thanks so much. This is extremely helpful.
J
John MoffatTutor·
Thank you for your comment :-)
S
sameer1713·
hi i need more help in understanding this, can anyone help me please, i am not good in accounting but i am learning.
J
John MoffatTutor·
What is it that you need more help in understanding? Have you watched my free lectures? If anything is not clear to you in the lectures then ask in the Ask the Tutor Forum.
C
cess2009·
Thank you.. this is really helpful.
J
John MoffatTutor·
Thank you for your comment :-)
H
Hassan·
I've watched the lectures but i couldn't answer Q 1
J
John MoffatTutor·
Have you checked the answer and understand it now?
H
Hassan·
where is the answer ?
J
John MoffatTutor·
The answers appear if you submit your answers and then 'review' the quiz.
A
Aman·
Sir can you please explain why in question 3 we have taken no of production run in calculating set up cost instead of taking total production. The overhead itself tells that its the total production setup cost.
J
John MoffatTutor·
Set-up costs are the costs of setting the machines every time there is a production run . It doesn't make any difference how many units they produce in the production run- they only need to set up the machines for each production run.
Did you watch my free lectures on ABC before attempting the test?
A
Aman·
Yes sir i did watched all the lectures.
J
John MoffatTutor·
Great :-) I hope you are now clear about the set-up costs.
Q
qwuda1·
got 100%.
amazing tutorials.
J
John MoffatTutor·
Thank you for your comment, and well done :-)
M
muashir·
thanks sir ,it help a lot
G
geetanjali1412·
regarding question 4, how come the cost of abc is greater than the benefits. in your lecture, there are 4 adv and only 2 disadv?
J
John MoffatTutor·
Counting the advantages and disadvantages means nothing at all.
The statement says the costs (i.e. in $'s) may be bigger than the benefits (i.e. the savings in $'s).
It does not say that they will be bigger -- hopefully they will be lower. But they may (might) be bigger.
I make this very clear in my lecture.
J
John MoffatTutor·
Might be bigger means that maybe they will be bigger but maybe they will not be bigger.
T
tikuku·
Hello,
Could someone explain me how in the 3rd question did we obtain the '115,200' figure and what does it represent?
Thanks
J
John MoffatTutor·
It is the total number of labour hours ( (2400 x 8) + (9600 x 10) )
Did you watch the free lectures before attempting the test?
P
protain·
I got 100% Thank your for Free Lectures
K
karinegukaa·
got 100%.
amazing tutorials.
S
SOLANKAR·
80percent
J
John MoffatTutor·
Great (but do make sure you have a Revision Kit from one of the ACCA approved publisher. They are full of questions and answers, and question practice is vital to passing the exam).
S
siobhanod·
I got 100%!!!!
Thank you so much for your excellent tutorial.
J
John MoffatTutor·
Thank you for your comment :-)
U
Urmil·
Hello, I just want to know how can ABC analysis help to reduce the "TOTAL" Overhead cost?
J
John MoffatTutor·
Have you not watched the free lecture on ABC, because I explain this in the lecture?
The biggest benefit of ABC is that because it makes us focus on what is causing the overheads to occur, we can look for ways of operating more efficiently and thus save costs.
I give examples of this in the lectures.
N
nazerke123·
Amazing... I scored 100%. Thank U!
J
John MoffatTutor·
Well done :-)
M
MohamedSupporter·
Wow. I got all correct in my first attempt. Thanks John for your amazing contribution towards our future. Without your lectures, I won't be able to clear out my exams. I will consider to donate some pounds to you guys.
J
John MoffatTutor·
Thank you for your comment :-)
However, do make sure that you buy a Revision Kit from one of the ACCA approved publishers, because they have lots of past exam and other exam standard questions for practice. It is important to practice lots of questions - just our pick tests is not enough :-)
M
MohamedSupporter·
Hello sir. Thanks for your advice. I have already ordered a BPP revision kit and study text. I know study text is not a must, but it is quite helpful when I got confused about a chapter.
J
John MoffatTutor·
You are welcome :-)
M
MohamedSupporter·
I did not read the question 3 well. It asked to calculate cost per unit for product Q. But I calculated cost per unit of product P thinking that was asked on the question. Next time I will be more careful for sure. Anyway, thanks to John for putting these questions. You are a rare kind of human being. God bless you John.
J
John MoffatTutor·
Thank you for your comment :-)
F
fazlollah·
In purpose of self-correction, How can I access the correct answers?
G
godaa·
please explain me number 5 . i feel the choose is wrong
A
Avron·
Good day Sir,
I trust you are well.
How do I calculate the 115200 in question 3?
Other overheads: 96000 x 230 400 / 115200 = 192 000
Regards
P
priscilla5236517·
Hello,other overheads basing on the question,consider labour hours,but the labour hours are per unit..if its per unit..calculate the total by labour hours*units..thats (8*2400)+(10*9600)=115200...
A
Avron·
Thank you
S
shope080·
Thank you for the Lecture, Note and Quiz. i can boldly say i understand the topic better. i was able to score 80%.
S
shope080·
Thank you for the Lecture, Note and the Quiz. i can boldly say i understand the chapter better. i was able to score 80%.
B
bbitwaye·
thank you for the notes, the lecture and the quiz I now understand the topic better coz I was able to score 100%
H
Harigovind·
I didn't get the question 5 option 3. Please tell me.
Thankyou in advance??
H
Harigovind·
I got 60% marks in this quiz. No.2 and no.5 are wrong because I don't know about traditional method and no.5 is wrong because i didn't understand the options no.2 and 3. Kindly please tell me.
Thankyou
J
John MoffatTutor·
Did you watch the free lectures before attempting the test?
Have you read my replies below regarding questions 2 and 5?
H
Hassan·
Hey can you please explain the statement no.3 of question 5. I am little confused here
J
John MoffatTutor·
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).
D
Danny·
Can you please explain statement 1 of question 2 ? I thought the opposite was true. Does traditional absorption costing technique allocate OH proportionally?
J
John MoffatTutor·
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.
J
James·
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 £100,000 overheads and 2 products of say 800 and 200. Traditional would just split it 50/50, so £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?
K
kennethsc1986·
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 :)
J
John MoffatTutor·
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.
P
priscilla5236517·
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
A
alie2018·
Thanks for this quiz. Very helpful
M
Mariam·
Thanks very helpful
J
John MoffatTutor·
You are welcome :-)
J
javad·
ok
J
javad·
Hello, please solve the problem solving method number 3
J
Jagmeet·
sir how do we measure the costs associated with ABC
J
John MoffatTutor·
You will be told the costs in the question.
(Please ask this sort of question in the Ask the Tutor Forum, and not a a comment on a test.)
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Jagmeet·
Thank you so much really appreciate it
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John MoffatTutor·
You are welcome :-)
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javad·
Hello, please solve the problem solving method number 3
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Jagmeet·
so like in question 1 we need to use the total no of set ups for X and Y cause they both cause the total set up costs
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John MoffatTutor·
Yes - that is true. And you can calculate the number of set-ups because you know the size of each batch.
Did you watch my free lectures on this before attempting the test?
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Jagmeet·
yes i did sir thank you
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Jagmeet·
yes i did sir thank you for answering me
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John MoffatTutor·
You are welcome :-)
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John MoffatTutor·
You are welcome :-)
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daniyalraja·
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?
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John MoffatTutor·
Provided that you do work through all of the questions in your Revision Kit, then the lectures (together with our free lecture notes) are certainly enough to be able to pass the exam well.
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Sabi·
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?
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John MoffatTutor·
All our lectures are relevant to the current syllabus, and have been updated where necessary.
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Sabi·
Excellent, thank you for confirming. I thought they were relevant as I used the lectures for F4 for March '18 exams and they were very helpful.
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olawepoomo·
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
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John MoffatTutor·
Thank you for the comment :-)
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treasure87·
Mr John, thanks kindly for the test very helpful
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John MoffatTutor·
You are welcome :-)
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wolde·
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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John MoffatTutor·
It is the most important advantage of ABC !!
Using ABC forces the company to find out what is causing each of the overheads, and can therefore look for ways of operating more efficiently and therefore reduce overheads.
I do explain this (with an example) in my free lectures on ABC.
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wolde·
Thanks!! I am just thinking it from allocation point of view rather than a technique, that is why I missed the concept.
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John MoffatTutor·
You are welcome :-)
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guimatsia·
it was great
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John MoffatTutor·
Good :-)
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chanhldv·
How useful it is!
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John MoffatTutor·
:-)
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jankey·
The test is great, thank you its helpful as a practice to all F5 student
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jankey·
The test is great, thank you its really helpful
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John MoffatTutor·
You are welcome :-)
(But make sure that you do buy a Revision Kit from one of the ACCA approved publishers - you need to practice as many questions as possible, and the Revision Kits contain lots of exam-standard questions.)
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Akua·
please i didnt understand how to calculate for the overhead costs absorbrsd on the basis of labour hours
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John MoffatTutor·
I don't know which of the questions you are referring to. I assume that you watched my free lectures on the absorption of overheads before attempting the test?
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Bonno·
Thank you the quiz it was really helpful
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John MoffatTutor·
Great :-)
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Ansu Koroma·
Thanks for the quiz. Very helpful
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John MoffatTutor·
You are welcome :-)
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kagofedguel·
Why is that in question 3 when we are suppose to say 230400/ (96000+19200)=2 then 2*19200=38400 coz we dealing Q but in the answer you have done the opposite...details for product P where used on the other overheads item....
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John MoffatTutor·
The answer is correct. There are 9,600 Q's and each takes 10 hours, which is 96,000 hours in total.
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Arshad·
Where else could we try more of such questions ?
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John MoffatTutor·
You must buy a Revision Kit from one of the ACCA approved publishers, as we recommend throughout this website.
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Ansu Koroma·
With regards question 2 why is it that traditional absorption costing systems tend to over cost high volume products and under cost low volume products? I know the opposite applies to ABC because overhead costs are now are larger proportion of overall or total cost in modern manufacturing and as a result the proportion of indirect costs is much higher than direct costs.
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Ansu Koroma·
I can see my comment has already been answered below. Thanks
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John MoffatTutor·
I am glad you found the answer :-)
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meme86·
Dear John,
where is the answer for the above inquire regards question 2?
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John MoffatTutor·
It is below.
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tola2016·
In regards to question 3 I understand how the answer came about but I was wondering how did you get the 115,200 in regards to working out other overheads
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John MoffatTutor·
The total labour hours are (2,400 x 8) + (9,600 x 10) = 115,200
I do suggest that you watch our free lecture on ABC!
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tola2016·
thank you
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John MoffatTutor·
You are welcome :-)
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Madiha·
hi,
i would appreciate if you explain how absorption costing under allocates costs to low volume products??
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John MoffatTutor·
Here is a very simple example to explain:
Suppose we make 100 units of A and 1,000 units of B.
Using absorption costing (it is on a per unit bases) would absorb the same amount per unit. Therefore in total B would be given 10 times as much overheads as A.
However, it could be that the overheads all related to setting up the machines for production and that they only need to set up the machines once for each product (regardless of how many they produce). Therefore using ABC an equal amount of overheads (in total) should be given to each product.
As a result using absorption costing is giving much lower overheads in total than if we used ABC.
(Again, this is only a very simple example to try and illustrate the point, and it will not necessarily always be the case, but for that sort of reason absorption will tend to end up giving lower overheads to low volume products than ABC.)
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tasya999·
greetings john,
by looking at this scenario, why we didnt say that low volume product (A) is over-allocated ,not under ;and vice versa.
for example, the overhead cost is $1000, so we`ll allocate the cost by A-$10 and B-$1
but yes, still, the fact that it said to be under-allocated still true,but why cant we say it is also can be called over-allocated
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duaa123·
I didn't get the general overheads part . I calculated the overhead absorption rate by the formulae TOTAL BUDGETED OH COST DIVIDE IT BY TOTAL BUDGETED LAB/MACHINE HOURS . 230400/115200 . I didn't get the rest of the part . how and y did u multiply it with 96000 :/
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John MoffatTutor·
It would help if you said the number of the question you are referring to!!
The absorption rate for 'other overheads' is 230,400/115,200, based on labour hours because the question said to use labour hours. (Machine hours are nothing to do with it).
The total labour hours used for product Q are 96,000 and therefore the total overhead for product Q is 96,000 x 230,400/115,200.
I do suggest that you watch the free lecture on absorption costing before attempting the test.
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barvince·
The questions says that the budgeted production units for Product Q is 9600; it then says that the Labour hours per unit for Product Q are 10. Therefore in order to make the budgeted 9600 units you would need to multiply (9600 x 10) = 96000. This gives the total labour hours that would be required to meet the budgeted production. Therefore when you are calculating the "Cost Per Other Overheads" you would then take (96000x$2.00 per unit) = $192,000
This is what I understood from working it out based on the example I had previously done in the lecture. Hope this helps.
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lethanhthuy·
Thank you for your great lecture and question!
Could you please help to explain the answer for the question about 'NOT the advantage of the ABC base costing'?
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John MoffatTutor·
The fact that for some overheads it might be impossible to identify a cost driver (and therefore be unable to apply ABC to those overheads) is not going to be an advantage of using ABC.
Forcing us to understand what drives an overheads is an advantage (because we can then try and use it more efficiently); the fact it deals with all overheads is an advantage; the fact that is can lead to a reduction in overheads is an advantage (because of using whatever is causing the overheads more efficiently)
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lethanhthuy·
In my so far understanding, total overhead doesn't change, just allocation amount will change in accordance with the identified cost driver? And now we just find different ways to distribute incurred cost to activities more reasonably.
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John MoffatTutor·
The main benefit of using ABC is that identifying what causes overheads can lead to using resources more efficiently and therefore lead to a reduction in the total overheads in the future.
I do suggest that you watch our free lecture on ABC where this is explained.
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Stephanie Barclay·
Hi
I am looking at the MCQ
A company manufactures two products, P and Q for this the following information is available:-
Budgeted production: P (2,400 units) Q (9,600 units)
Labour hours per unit: P (8) Q (10)
# of production runs required: P (13) Q (15)
# of inspections during production;: P (5) Q (3)
Total production set-up costs $336,000
Total inspection costs $192,000
Total overhead costs $230,400
Other overhead costs are absorbed on the basis of labour hours.
I have done the following
Production set up $336K/28 ie the # of production runs then I multiply by 15 = 180K
Inspections $192K/8 ie total # of inspections the multiply by 3 = 72K
General overhead $230,400K/18 Labour hours by *10 = 96K
180K+72K+96K = 380K/9.6K = €39.58
Could you tell me where I have gone wrong?
Thanks
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yvonne ang·
General overhead should be $230000 / (2400x8hrs)+(9600x10hrs) divided by 96000 units = $192000
# 180k + 72k + 192k = 444k / 9.6k = $46.25
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Stephanie Barclay·
Thanks
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John MoffatTutor·
You are welcome :-)
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Stephanie Barclay·
Hi
I am looking at the MCQ
A company manufactures two products, P and Q for this the following information is available:-
Budgeted production: P (2,400 units) Q (9,600 units)
Labour hours per unit: P (8) Q (10)
# of production runs required: P (13) Q (15)
# of inspections during production;: P (5) Q (3)
Total production set-up costs $336,000
Total inspection costs $192,000
Total overhead costs $230,400
Other overhead costs are absorbed on the basis of labour hours.
I have done the following
Production set up $336K/28 ie the # of production runs then I multiply by 15 = 180K
Inspections $192K/8 ie total # of inspections the multiply by 3 = 72K
General overhead $230,400K/18 Labour hours by *10 = 96K
180K+72K+96K = 380K/9.6K = €39.58
Could you tell me where I have gone wrong?
Thank
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Erica·
Sir, this question :
A company manufactures two products, P and Q for this the following information is available:-
Budgeted production: P (2,400 units) Q (9,600 units)
Labour hours per unit: P (8) Q (10)
# of production runs required: P (13) Q (15)
# of inspections during production;: P (5) Q (3)
Total production set-up costs $336,000
Total inspection costs $192,000
Total overhead costs $230,400
Other overhead costs are absorbed on the basis of labour hours.
The way I calculate it is: i multiply the budgeted production units of the 2 productsnd total them up together becoming 115,200 with its respective labour hours per unit and total them up together becoming 115,200. then divided it with the total overhead costs and got $2. I do not know where have I gone wrong.
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John MoffatTutor·
That bit of the answer is correct.
However, two problems:
One is that set-up costs and inspection costs are also overheads.
Second is that the question wants to know the overhead cost per unit of Product Q.
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Erica·
and Sir, traditional costing tends to OVER or UNDER allocate costs to low-volume product? Coz here, the correct answer mentioned are both statements true but the answer at the back of your F5 lecture course notes is written as only statement 2 is true. Which is which?
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John MoffatTutor·
I don't know if you are using an old set of the Lecture Notes - maybe there was a typing error that was later corrected.
However, both the lecture notes and this test give the same correct answer which is that both statements are true.
Traditional costing tends to under-allocate costs to low-volume products.
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Erica·
Why does it tend to under-allocate costs to low products?
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John MoffatTutor·
Here is a very simple illustration.
Suppose a business produces 100 units of product A and 1000 units of product B.
The total overheads are $1,100.
Tradition costing will absorb the overheads at $1 per unit. So a total of $100 for product A and a total of $1,000 for product B.
Suppose now that the overheads of $1100 are set-up costs, and each product needs 1 set-up regardless of how many are produced (so 2 set-ups in total).
Since the cost per set-up is $550, the total overheads should (under ABC) be $550 for A and $550 for B.
The problem does not always exist, but traditional absorption does tend to under allocate costs to low volume products as I have illustrated above.
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Erica·
But with ABC, costs will not be under-allocated to low volume products (fair allocation of costs), is that what you were trying to say?
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John MoffatTutor·
I repeat, absorption costing does tend to under-allocate costs to low volume products (as compared to ABC).
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Gary·
I do not understand this one either.
My workings:
P Hours 19200 and Q 96000
Runs 13 @ 185units per run and Q 15 runs at 640units per run
Inspections 5 and 3 respectively, with Q (3 inspections per run, each run 640 units)
So Runs are 12000 each (336k/28), divide by 640 to get a per unit value = 18.75
Inspections (192k/8) = 24000. Q has 3. 24000*3 / 9600units = 7.50
Labour/other hrs (230400/115200 total hours) = 2 per hour. Q needs 8 hours, therefore 16.00 per unit.
Q = $42.25?
Please help.
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Gary·
I do not understand this one either.
My workings:
P Hours 19200 and Q 96000
Runs 13 @ 185units per run and Q 15 runs at 640units per run
Inspections 5 and 3 respectively, with Q (3 inspections per run, each run 640 units)
So Runs are 12000 each (336k/28), divide by 640 to get a per unit value = 18.75
Inspections (192k/8) = 24000. Q has 3. 24000*3 / 9600units = 7.50
Labour/other hrs (230400/115200 total hours) = 2 per hour. Q needs 8 hours, therefore 16.00 per unit.
Q = $42.25?
Please help.
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Krebby·
Yes please add the answer working, its easier and quicker to follow up that way. upon submission if the answer is incorrect the correct working should also pop up..even in an event that the answer is right the working should still show for the sake of comparison
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John MoffatTutor·
We provide this website free of charge and the current software does not allow the workings to appear.
When we can afford it we will upgrade but until then you should ask here if you have a problem.
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Leonis Nyuma Sesay·
What is the solution to question 5?
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John MoffatTutor·
I am afraid that until now the questions have been appearing in a random order (this has now been corrected).
But it does mean that what you got as question 5 could appear as question 1 for other people.
So I don't know which question you mean.
Please say a bit more about what was in the question and then I will help you :-)
(As I say - the problem has now been corrected, and so it won't be a problem in future).
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afazel·
Please add the answers working for students to work out the answers in MCQ questions
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John MoffatTutor·
We provide this website free of charge and the current software does not allow the workings to appear.
When we can afford it we will upgrade but until then you should ask here if you have a problem.
(I assume, of course, that you have watched the relevant lectures on this website.)
Adopting ABC forces companies to examine why they are incurring the overheads, which can lead to greater efficiency and a reduction in the costs.
https://opentuition.com/forum/technical-problems/
set-ups cost fot Q per unit?$33600*15/28/9600=$18.75
Insepection cost for Q per unit?$19200*3/8/9600=$7.5
other overhead cost for Q per unit: $230400/(2400*3+9600*10)=$2
so total overhead for Q per unit :$28.25
According to the quesiton, only other overhead are absorped by basic of labour hours,so it does not mean all the overhead have to be absorped by labour hour. who can tell me why my understanding is wrong ?
best regards
Does it not necessarily need to use cost driver data related to "number of set-ups" when calculating the set up cost?
Because from the question and answer itself, it using data of production per units to get the set up cost per unit.
Thanks for the answer.
The total number for Q are 9,500 x 10 = 96,000
So the total number of labour hours budgeted is 19,200 + 96,000.
So statement number 1 is about (Traditional costing) and statement number two is about ABC, so answer 1 should be correct but not both as the first is about Traditional costing ??
In question 3 how do you get 192000/8? how do you arrive at 8?
Lee
In question 3, how do you get to 115,200?
Kind regards
For question 3, I wrongly match the cost driver of setup cost and other overhead costs; how can we identify or co-relate the overhead costs to each cost driver? It is because for Chaper 1 of example 1, each cost driver can easily match with each overheads cost.
Set-up costs are based on production runs as explained in the free lecture (but is helped anyway by the fact that inspection costs are obvious, and so there are only production runs left to choose :-) )
Do you suggest we do the revision kit after every chapter?
wouldn't the questions have more parts that require other chapters?
I did 230400/18*10= 128000
So the total hours for P are 2,400 x 8 = 19,200, and for Q are 9,600 x 10 = 96,000. So in total 115,200 hours.
(It is the same idea as in the example I work through in my free lecture.)
And 1 more question Sir,
In the first question after finding the cost per setup ,i.e., $1000
Next step can't we do $1000/ 1000 units?
And get $1.00/unit as the answer?
Please suggest me the best revision book
Thanks
BPP and Kaplan are the ACCA Approved Publishers and their books are both as good as each other. I myself have the BPP Revision Kit (and you can get a 20% discount from BPP if you click on the BPP link that is on most of the pages on our website).
Thank you Sir
The question asks for overhead the cost per unit of Q, and the correct answer is the overhead cost for Q which is $46.25.
Did you not watch my free lectures before attempting the test?
when it says ''not an advantage'' doesn't necessarily mean that it would be a disadvantage.
in short the third option is a disadvantage
it is possible that if something is ''not an advantage'' it may not be a disadvantage either.
If it is this statement that you are referring to, then it is certainly not a disadvantage. It is the main advantage of using ABC as I explain in my free lectures on this.
The correct answer is that "it may be impossible to allocate all overheads to specific activities" because it is a fact and is certainly not an advantage.
However, as I explain in my free lectures, the main benefit in practice for using ABC is that it forced the company to find out what is causing the overheads. That leads to using them more efficiently and results in a saving of overheads.
Again, I explain this in my lecture with examples.
For the first question, while calculating the total cost for product X why is 20000 divided by 1000?
Also I am confused witht the second question, can someone please explain why both the statements are right?
As far as the second question is concerned, statement 2 is the definition of a cost driver as I explain in my free lectures on ABC.
Statement 1 is best explained by looking back at the example in the notes that I work through in my lecture. Product C is a much lower volume than the other 2 products. Using traditional absorption the overheads are $2.84 per hour whereas with ABC the overheads are $8.63. I do explain in the lecture why this has happened.
I am quite confused with the solutions in the task with products P and Q. In the feedback, you arrived to 46.25 (the same as I indicated as a correct answer, but it was marked as wrong answer, saying that the correct answer is 140.64. I am bit confused. Thank you in advance for clarifications!
Try reloading the page and trying the question again.
Could you please explain to me how you allocated other overheads on that question?
I got 80%.
The only question I got confused is Q2.
Could you please give an example or kind of deeper explanation on "How the traditional absorption costing tends to Under-Allocate OH cost to low-volume products"?
Could you please build bank of OT questions in order that I can pratice more ? At present, the same question appears each time I pratice.
Thank you.
You need to buy a Revision Kit from one of the ACCA approved publishers (BPP and Kaplan). They are full of past exam and other exam standard questions in the same format as those in the real exam.
Thank you for the quiz. I can't figure out where we got the $115200 on overheads. Please assist.thank you
I found it, thanks
Did you watch my free lectures on ABC before attempting the test?
amazing tutorials.
The statement says the costs (i.e. in $'s) may be bigger than the benefits (i.e. the savings in $'s).
It does not say that they will be bigger -- hopefully they will be lower. But they may (might) be bigger.
I make this very clear in my lecture.
Could someone explain me how in the 3rd question did we obtain the '115,200' figure and what does it represent?
Thanks
Did you watch the free lectures before attempting the test?
amazing tutorials.
Thank you so much for your excellent tutorial.
The biggest benefit of ABC is that because it makes us focus on what is causing the overheads to occur, we can look for ways of operating more efficiently and thus save costs.
I give examples of this in the lectures.
However, do make sure that you buy a Revision Kit from one of the ACCA approved publishers, because they have lots of past exam and other exam standard questions for practice. It is important to practice lots of questions - just our pick tests is not enough :-)
I trust you are well.
How do I calculate the 115200 in question 3?
Other overheads: 96000 x 230 400 / 115200 = 192 000
Regards
Thankyou in advance??
Thankyou
Have you read my replies below regarding questions 2 and 5?
This is true - as I explain in my lectures, it makes the company find out what is causing the overheads (the cost driver).
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 £100,000 overheads and 2 products of say 800 and 200. Traditional would just split it 50/50, so £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?
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 :)
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.
(Please ask this sort of question in the Ask the Tutor Forum, and not a a comment on a test.)
Did you watch my free lectures on this before attempting the test?
Using ABC forces the company to find out what is causing each of the overheads, and can therefore look for ways of operating more efficiently and therefore reduce overheads.
I do explain this (with an example) in my free lectures on ABC.
(But make sure that you do buy a Revision Kit from one of the ACCA approved publishers - you need to practice as many questions as possible, and the Revision Kits contain lots of exam-standard questions.)
where is the answer for the above inquire regards question 2?
I do suggest that you watch our free lecture on ABC!
i would appreciate if you explain how absorption costing under allocates costs to low volume products??
Suppose we make 100 units of A and 1,000 units of B.
Using absorption costing (it is on a per unit bases) would absorb the same amount per unit. Therefore in total B would be given 10 times as much overheads as A.
However, it could be that the overheads all related to setting up the machines for production and that they only need to set up the machines once for each product (regardless of how many they produce). Therefore using ABC an equal amount of overheads (in total) should be given to each product.
As a result using absorption costing is giving much lower overheads in total than if we used ABC.
(Again, this is only a very simple example to try and illustrate the point, and it will not necessarily always be the case, but for that sort of reason absorption will tend to end up giving lower overheads to low volume products than ABC.)
by looking at this scenario, why we didnt say that low volume product (A) is over-allocated ,not under ;and vice versa.
for example, the overhead cost is $1000, so we`ll allocate the cost by A-$10 and B-$1
but yes, still, the fact that it said to be under-allocated still true,but why cant we say it is also can be called over-allocated
The absorption rate for 'other overheads' is 230,400/115,200, based on labour hours because the question said to use labour hours. (Machine hours are nothing to do with it).
The total labour hours used for product Q are 96,000 and therefore the total overhead for product Q is 96,000 x 230,400/115,200.
I do suggest that you watch the free lecture on absorption costing before attempting the test.
This is what I understood from working it out based on the example I had previously done in the lecture. Hope this helps.
Could you please help to explain the answer for the question about 'NOT the advantage of the ABC base costing'?
Forcing us to understand what drives an overheads is an advantage (because we can then try and use it more efficiently); the fact it deals with all overheads is an advantage; the fact that is can lead to a reduction in overheads is an advantage (because of using whatever is causing the overheads more efficiently)
I do suggest that you watch our free lecture on ABC where this is explained.
I am looking at the MCQ
A company manufactures two products, P and Q for this the following information is available:-
Budgeted production: P (2,400 units) Q (9,600 units)
Labour hours per unit: P (8) Q (10)
# of production runs required: P (13) Q (15)
# of inspections during production;: P (5) Q (3)
Total production set-up costs $336,000
Total inspection costs $192,000
Total overhead costs $230,400
Other overhead costs are absorbed on the basis of labour hours.
I have done the following
Production set up $336K/28 ie the # of production runs then I multiply by 15 = 180K
Inspections $192K/8 ie total # of inspections the multiply by 3 = 72K
General overhead $230,400K/18 Labour hours by *10 = 96K
180K+72K+96K = 380K/9.6K = €39.58
Could you tell me where I have gone wrong?
Thanks
# 180k + 72k + 192k = 444k / 9.6k = $46.25
I am looking at the MCQ
A company manufactures two products, P and Q for this the following information is available:-
Budgeted production: P (2,400 units) Q (9,600 units)
Labour hours per unit: P (8) Q (10)
# of production runs required: P (13) Q (15)
# of inspections during production;: P (5) Q (3)
Total production set-up costs $336,000
Total inspection costs $192,000
Total overhead costs $230,400
Other overhead costs are absorbed on the basis of labour hours.
I have done the following
Production set up $336K/28 ie the # of production runs then I multiply by 15 = 180K
Inspections $192K/8 ie total # of inspections the multiply by 3 = 72K
General overhead $230,400K/18 Labour hours by *10 = 96K
180K+72K+96K = 380K/9.6K = €39.58
Could you tell me where I have gone wrong?
Thank
A company manufactures two products, P and Q for this the following information is available:-
Budgeted production: P (2,400 units) Q (9,600 units)
Labour hours per unit: P (8) Q (10)
# of production runs required: P (13) Q (15)
# of inspections during production;: P (5) Q (3)
Total production set-up costs $336,000
Total inspection costs $192,000
Total overhead costs $230,400
Other overhead costs are absorbed on the basis of labour hours.
The way I calculate it is: i multiply the budgeted production units of the 2 productsnd total them up together becoming 115,200 with its respective labour hours per unit and total them up together becoming 115,200. then divided it with the total overhead costs and got $2. I do not know where have I gone wrong.
However, two problems:
One is that set-up costs and inspection costs are also overheads.
Second is that the question wants to know the overhead cost per unit of Product Q.
However, both the lecture notes and this test give the same correct answer which is that both statements are true.
Traditional costing tends to under-allocate costs to low-volume products.
Suppose a business produces 100 units of product A and 1000 units of product B.
The total overheads are $1,100.
Tradition costing will absorb the overheads at $1 per unit. So a total of $100 for product A and a total of $1,000 for product B.
Suppose now that the overheads of $1100 are set-up costs, and each product needs 1 set-up regardless of how many are produced (so 2 set-ups in total).
Since the cost per set-up is $550, the total overheads should (under ABC) be $550 for A and $550 for B.
The problem does not always exist, but traditional absorption does tend to under allocate costs to low volume products as I have illustrated above.
My workings:
P Hours 19200 and Q 96000
Runs 13 @ 185units per run and Q 15 runs at 640units per run
Inspections 5 and 3 respectively, with Q (3 inspections per run, each run 640 units)
So Runs are 12000 each (336k/28), divide by 640 to get a per unit value = 18.75
Inspections (192k/8) = 24000. Q has 3. 24000*3 / 9600units = 7.50
Labour/other hrs (230400/115200 total hours) = 2 per hour. Q needs 8 hours, therefore 16.00 per unit.
Q = $42.25?
Please help.
My workings:
P Hours 19200 and Q 96000
Runs 13 @ 185units per run and Q 15 runs at 640units per run
Inspections 5 and 3 respectively, with Q (3 inspections per run, each run 640 units)
So Runs are 12000 each (336k/28), divide by 640 to get a per unit value = 18.75
Inspections (192k/8) = 24000. Q has 3. 24000*3 / 9600units = 7.50
Labour/other hrs (230400/115200 total hours) = 2 per hour. Q needs 8 hours, therefore 16.00 per unit.
Q = $42.25?
Please help.
When we can afford it we will upgrade but until then you should ask here if you have a problem.
But it does mean that what you got as question 5 could appear as question 1 for other people.
So I don't know which question you mean.
Please say a bit more about what was in the question and then I will help you :-)
(As I say - the problem has now been corrected, and so it won't be a problem in future).
When we can afford it we will upgrade but until then you should ask here if you have a problem.
(I assume, of course, that you have watched the relevant lectures on this website.)