Absorption Costing

Worked examples (10)

• 1Cost centre vs cost unit (3 marks)
• 2Allocate or apportion? (3 marks)
• 3Choosing the basis of apportionment (5 marks)
• 4Apportion rent by floor area (4 marks)
• 5Apportion several overheads at once (6 marks)
• 6Build a small overhead analysis sheet (6 marks)
• 7Reapportion one service department (5 marks)
• 8Two service departments — direct method (6 marks)
• 9Service departments serving each other (7 marks)
• 10Why the choice of basis matters (4 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style

Worked examples (10)

• 1Calculate a machine-hour OAR (3 marks)
• 2Labour-hour vs machine-hour rate (4 marks)
• 3Overhead absorbed by a job (3 marks)
• 4Full cost of a job (5 marks)
• 5Selling price from full cost (5 marks)
• 6Total overhead absorbed in a period (4 marks)
• 7Under- or over-absorbed? (6 marks)
• 8Over-absorption (5 marks)
• 9Why does under/over-absorption arise? (4 marks)
• 10Different rates in two departments (6 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style

Worked examples (10)

• 1What absorption costing is (3 marks)
• 2Two uses of absorption costing (4 marks)
• 3Why inventory must include overhead (4 marks)
• 4The arbitrary-apportionment limitation (4 marks)
• 5Why not for short-term decisions (5 marks)
• 6Full cost vs marginal cost (5 marks)
• 7Why the two methods give different profit (5 marks)
• 8Absorption costing vs ABC (5 marks)
• 9Advise which method to use (6 marks)
• 10Over-production risk (4 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style