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activity based costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › activity based costing

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.
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  • Author
    Posts
  • May 23, 2020 at 8:06 am #571637
    chandni24
    Participant
    • Topics: 25
    • Replies: 6
    • ☆

    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 true

    May 23, 2020 at 10:21 am #571648
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54675
    • ☆☆☆☆☆

    I 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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