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past paper June 2015
section B BECKLEY HILL
Question number 5
When using activity-based costing (ABC), the full cost for Procedure A is
approximately $2,297 and $4,853 for Procedure B. BH has decided that an activity based
costing (ABC) system is too time consuming and costly to implement.
Which of the following statements is/are true?
(1) Whilst the comparative costs of Procedures A and B are different under ABC,
they are not different enough to justify the implementation of an ABC system.
(2) A similar allocation of overheads can be achieved simply by using ‘patient
hours’ as a basis to absorb the cost
I don’t understand why in the answer they said statement (1) is trueI am guessing that you have found this question in a Revision Kit, in which case it has been adapted from the original exam question (the original exam question was a full 10 mark question). I do not therefore know what the version you have asked in the other parts of the question.
However in the original exam answer, the examiner wrote that had they simply absorbed the costs on the basis of patient hours instead of using ABC, then the cost per procedure would have been almost the same as with ABC (so statement 2 is true) and it would have meant a lot less work and therefore been less costly (so statement 1 is true).
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