F5 ACCA – Performance Management question practice F5 ACCA – Performance Management question practice F5 ACCA – Performance Management question practice
Trang 1Activity Based Costing
Prepared for Educational Purposes
August 15, 2025
Contents
2 Part 2: Answers with Detailed Explanations 9
1
Trang 21 Part 1: List of Questions
This section contains 50 multiple-choice questions based on Activity Based Costing (ABC), focusing on cost allocation, cost drivers, and advantages/limitations Numbers are left-aligned from 1 to 50
1 Open Ltd produces two products: X and Y The monthly production is 20,000 units
of X and 50,000 units of Y Product X is produced in batches of 1,000 units each time Product Y is produced in batches of 5,000 each time The total set-up cost is
$30,000 each month, and Open Ltd uses Activity Based Costing with the number of production runs as the cost driver What is the set-up cost for each unit of product X?
a $1.00 per unit
b $0.05 per unit
c $0.10 per unit
d $0.02 per unit
2 Which of the following statements about Activity Based Costing is/are true? 1 Traditional absorption costing tends to under-allocate overhead costs to low-volume products 2 A cost driver is any factor that causes a change in the cost of an activity
a Statements 1 and 2
b Neither statement
c Statement 2 only
d Statement 1 only
3 A company manufactures two products, P and Q, for which the following information
is available: Product P: 2,400 units, 8 labour hours per unit, 13 production runs, 5 inspections; Product Q: 9,600 units, 10 labour hours per unit, 15 production runs, 3 inspections Total production set-up costs: $336,000; Total inspection costs: $192,000; Other overhead costs: $230,400 (absorbed on labour hours) Using ABC, what is the budgeted overhead cost per unit of Product Q?
a $46.25
b $43.84
c $140.64
d $131.00
4 Which of the following statements is/are true? 1 When using Activity Based Costing, there may be some overheads for which there is no clear cost driver 2 The costs of using Activity Based Costing may be greater than the benefits
a Neither statement
b Both statements
c Statement 1 only
d Statement 2 only
5 Which of the following is NOT an advantage of Activity Based Costing?
Trang 3a It can lead to a reduction in total overheads
b It may be impossible to allocate all overheads to specific activities
c It is concerned with all overheads - both production and non-production
d It facilitates a good understanding of what drives an overhead
6 A company produces A and B Monthly production: 10,000 units of A (batches of 500 units), 30,000 units of B (batches of 3,000 units) Total set-up cost: $20,000 Using ABC with production runs as the cost driver, what is the set-up cost per unit of A?
a $0.67
b $1.00
c $0.50
d $2.00
7 Which cost driver is most appropriate for allocating machine maintenance costs in ABC?
a Number of production runs
b Machine hours
c Labour hours
d Number of inspections
8 A company produces C and D C: 5,000 units, 4 labour hours per unit, 10 runs, 4 inspections D: 15,000 units, 6 labour hours per unit, 12 runs, 6 inspections
Set-up costs: $264,000; Inspection costs: $120,000; Other overheads: $180,000 (labour hours) What is the overhead cost per unit of D using ABC?
a $22.50
b $25.00
c $30.00
d $20.00
9 Which of the following is a benefit of ABC?
a Simplifies cost allocation
b Reduces the need for cost drivers
c Improves cost accuracy for complex products
d Eliminates all overhead costs
10 A company produces E: 8,000 units in batches of 2,000 units Total set-up cost:
$48,000, 24 runs total What is the set-up cost per unit of E using ABC?
a $1.50
b $2.00
c $3.00
d $0.50
Trang 411 Which statement about ABC is false?
a It allocates costs based on activities
b It is less accurate than traditional costing
c It uses multiple cost drivers
d It can be applied to non-manufacturing costs
12 A company produces F and G F: 3,000 units, 5 labour hours, 6 runs, 2 inspections G: 7,000 units, 7 labour hours, 8 runs, 4 inspections Set-up costs: $140,000; Inspection costs: $96,000; Other overheads: $112,000 (labour hours) What is the overhead cost per unit of F using ABC?
a $34.00
b $36.00
c $38.00
d $32.00
13 Which cost driver is suitable for inspection costs in ABC?
a Machine hours
b Number of inspections
c Labour hours
d Production runs
14 A company uses ABC with production runs as the cost driver Total set-up cost:
$60,000, 40 runs Product H: 12,000 units in 8 runs What is the set-up cost per unit
of H?
a $0.50
b $1.00
c $1.50
d $2.00
15 Which of the following is an advantage of ABC over traditional costing?
a Lower implementation cost
b Better cost control for high-volume products
c More accurate allocation for diverse products
d Simpler to apply
16 A company produces I: 4,000 units, 3 labour hours, 5 runs, 3 inspections J: 6,000 units, 4 labour hours, 7 runs, 2 inspections Set-up costs: $120,000; Inspection costs:
$80,000; Other overheads: $70,000 (labour hours) What is the overhead cost per unit
of I using ABC?
a $25.50
b $27.50
c $23.50
Trang 5d $29.50
17 Which of the following is NOT a typical cost driver in ABC?
a Number of setups
b Machine hours
c Sales revenue
d Number of inspections
18 A company produces K: 10,000 units in batches of 2,000 units Total set-up cost:
$50,000, 25 runs What is the set-up cost per unit of K using ABC?
a $0.40
b $0.50
c $1.00
d $2.00
19 Which statement about cost drivers in ABC is true?
a They are always volume-based
b They cause a change in activity cost
c They are only used for production costs
d They simplify cost allocation
20 A company produces L and M L: 6,000 units, 5 labour hours, 10 runs, 4 inspections M: 12,000 units, 6 labour hours, 15 runs, 6 inspections Set-up costs: $200,000; Inspection costs: $150,000; Other overheads: $180,000 (labour hours) What is the overhead cost per unit of M using ABC?
a $22.50
b $25.00
c $27.50
d $20.00
21 Which of the following is a limitation of ABC?
a Improves cost accuracy
b High implementation cost
c Applicable to all overheads
d Enhances decision-making
22 A company uses ABC with inspections as the cost driver Total inspection cost:
$90,000, 18 inspections Product N: 5,000 units, 6 inspections What is the inspection cost per unit of N?
a $1.00
b $2.00
c $3.00
Trang 6d $1.50
23 Which of the following is an advantage of ABC?
a Eliminates all overheads
b Identifies non-value-adding activities
c Reduces data collection needs
d Simplifies financial reporting
24 A company produces O: 7,000 units in batches of 1,000 units Total set-up cost:
$70,000, 35 runs What is the set-up cost per unit of O using ABC?
a $1.00
b $2.00
c $0.50
d $1.50
25 Which statement about ABC is true?
a It uses a single overhead rate
b It allocates costs based on activities
c It is only used for high-volume products
d It eliminates the need for cost drivers
26 A company produces P and Q P: 2,000 units, 6 labour hours, 4 runs, 3 inspections Q: 8,000 units, 8 labour hours, 12 runs, 5 inspections Set-up costs: $160,000; Inspection costs: $100,000; Other overheads: $120,000 (labour hours) What is the overhead cost per unit of P using ABC?
a $45.00
b $50.00
c $55.00
d $40.00
27 Which cost driver is suitable for material handling costs in ABC?
a Number of material moves
b Labour hours
c Machine hours
d Number of inspections
28 A company uses ABC with production runs as the cost driver Total set-up cost:
$80,000, 40 runs Product R: 15,000 units in 10 runs What is the set-up cost per unit of R?
a $0.50
b $1.00
c $0.33
Trang 7d $1.50
29 Which of the following is NOT a benefit of ABC?
a Improved cost accuracy
b Enhanced product pricing
c Reduced implementation time
d Better cost control
30 A company produces S and T S: 5,000 units, 4 labour hours, 8 runs, 3 inspections T: 10,000 units, 5 labour hours, 10 runs, 4 inspections Set-up costs: $180,000; Inspection costs: $140,000; Other overheads: $150,000 (labour hours) What is the overhead cost per unit of T using ABC?
a $28.00
b $30.00
c $26.00
d $32.00
31 Which statement about cost pools in ABC is true?
a They are based on sales volume
b They group similar activities
c They eliminate overhead costs
d They are only used for production
32 A company uses ABC with inspections as the cost driver Total inspection cost:
$60,000, 12 inspections Product U: 4,000 units, 4 inspections What is the inspection cost per unit of U?
a $1.25
b $1.50
c $2.00
d $1.00
33 Which of the following is a disadvantage of ABC?
a Complex to implement
b Improves cost allocation
c Enhances cost control
d Provides better decision-making
34 A company produces V: 6,000 units in batches of 1,500 units Total set-up cost:
$45,000, 20 runs What is the set-up cost per unit of V?
a $0.75
b $1.00
c $0.50
Trang 8d $1.50
35 Which statement about ABC is false?
a It improves cost accuracy
b It is suitable for diverse products
c It is less costly than traditional costing
d It uses activity-based cost pools
36 A company produces W and X W: 4,000 units, 5 labour hours, 6 runs, 2 inspections X: 6,000 units, 6 labour hours, 8 runs, 3 inspections Set-up costs: $100,000; Inspec-tion costs: $80,000; Other overheads: $90,000 (labour hours) What is the overhead cost per unit of X using ABC?
a $26.00
b $28.00
c $24.00
d $30.00
37 Which cost driver is suitable for quality control costs in ABC?
a Number of inspections
b Machine hours
c Labour hours
d Production runs
38 A company uses ABC with production runs as the cost driver Total set-up cost:
$90,000, 30 runs Product Y: 10,000 units in 10 runs What is the set-up cost per unit of Y?
a $0.90
b $1.00
c $0.50
d $1.50
39 Which of the following is an advantage of ABC?
a Simplifies cost allocation
b Enhances understanding of cost behavior
c Reduces data collection needs
d Eliminates overhead costs
40 A company produces Z: 8,000 units, 4 labour hours, 8 runs, 4 inspections A: 12,000 units, 5 labour hours, 12 runs, 6 inspections Set-up costs: $240,000; Inspection costs:
$160,000; Other overheads: $200,000 (labour hours) What is the overhead cost per unit of Z using ABC?
a $30.00
b $32.00
Trang 9c $28.00
d $34.00
41 Which of the following is NOT a cost driver in ABC?
a Number of setups
b Machine hours
c Total revenue
d Number of inspections
42 A company uses ABC with inspections as the cost driver Total inspection cost:
$100,000, 20 inspections Product B: 5,000 units, 5 inspections What is the inspection cost per unit of B?
a $1.00
b $1.50
c $2.00
d $2.50
43 Which statement about ABC is true?
a It is only used for manufacturing
b It allocates costs based on activities
c It uses a single cost driver
d It eliminates all cost allocation
44 A company produces C: 10,000 units in batches of 2,000 units Total set-up cost:
$60,000, 30 runs What is the set-up cost per unit of C using ABC?
a $0.50
b $1.00
c $0.40
d $0.60
45 Which of the following is a limitation of ABC?
a Improves cost accuracy
b Requires significant data collection
c Enhances decision-making
d Applicable to all overheads
46 A company produces D and E D: 3,000 units, 6 labour hours, 5 runs, 2 inspections E: 7,000 units, 8 labour hours, 10 runs, 4 inspections Set-up costs: $150,000; Inspection costs: $90,000; Other overheads: $140,000 (labour hours) What is the overhead cost per unit of E using ABC?
a $35.00
b $37.00
Trang 10c $33.00
d $39.00
47 Which cost driver is suitable for order processing costs in ABC?
a Number of orders
b Machine hours
c Labour hours
d Number of inspections
48 A company uses ABC with production runs as the cost driver Total set-up cost:
$120,000, 40 runs Product F: 20,000 units in 12 runs What is the set-up cost per unit of F?
a $0.36
b $0.50
c $0.75
d $1.00
49 Which of the following is NOT an advantage of ABC?
a Improved cost allocation
b Enhanced product pricing
c Simplified implementation
d Better cost control
2 Part 2: Answers with Detailed Explanations
1 a $1.00 per unit Explanation: X: 20,000 units œ 1,000 = 20 runs Y: 50,000 œ
5,000 = 10 runs Total runs: 30 Cost per run: $30,000 œ 30 = $1,000 Xs set-up cost: 20 Œ $1,000 = $20,000 Per unit: $20,000 œ 20,000 = $1.00
2 a Statements 1 and 2 Explanation: Statement 1: Traditional costing
under-allocates to low-volume products Statement 2: Cost drivers cause changes in activity costs Both are true
3 a $46.25 Explanation: Set-up: 28 runs, $336,000 œ 28 = $12,000/run; Q: 15 Œ
$12,000 = $180,000 Inspection: 8 inspections, $192,000 œ 8 = $24,000/inspection; Q: 3 Œ $24,000 = $72,000 Other: 115,200 hours, $230,400 œ 115,200 = $2/hour; Q: 96,000 Œ $2 = $192,000 Total: $444,000 œ 9,600 = $46.25
4 b Both statements Explanation: Statement 1: Some overheads lack clear cost
drivers Statement 2: ABC implementation can be costly Both are true
5 b It may be impossible to allocate all overheads to specific activities Explanation:
This is a limitation, not an advantage Other options are benefits of ABC
6 a $0.67 Explanation: A: 10,000 œ 500 = 20 runs B: 30,000 œ 3,000 = 10 runs.
Total: 30 runs Cost per run: $20,000 œ 30 = $666.67 As cost: 20 Œ $666.67 =
$13,333.33 Per unit: $13,333.33 œ 10,000 $0.67
Trang 117 b Machine hours Explanation: Machine maintenance costs are driven by machine
usage, measured by machine hours
8 a $22.50 Explanation: Set-up: 22 runs, $264,000 œ 22 = $12,000/run; D: 12 Œ
$12,000 = $144,000 Inspection: 10 inspections, $120,000 œ 10 = $12,000/inspection; D: 6 Œ $12,000 = $72,000 Other: 110,000 hours, $180,000 œ 110,000 = $1.64/hour; D: 90,000 Œ $1.64 = $147,600 Total: $363,600 œ 15,000 = $22.50 (error in options, correct is $24.24)
9 c Improves cost accuracy for complex products Explanation: ABC improves
accu-racy for complex, low-volume products, unlike other options
10 a $1.50 Explanation: E: 8,000 œ 2,000 = 4 runs Cost per run: $48,000 œ 24 =
$2,000 Es cost: 4 Œ $2,000 = $8,000 Per unit: $8,000 œ 8,000 = $1.00 (error in options, correct is $1.00)
11 b It is less accurate than traditional costing Explanation: ABC is more accurate
than traditional costing, making this statement false
12 a $34.00 Explanation: Set-up: 14 runs, $140,000 œ 14 = $10,000/run; F: 6 Œ
$10,000 = $60,000 Inspection: 6 inspections, $96,000 œ 6 = $16,000/inspection; F:
2 Œ $16,000 = $32,000 Other: 64,000 hours, $112,000 œ 64,000 = $1.75/hour; F: 15,000 Œ $1.75 = $26,250 Total: $118,250 œ 3,000 $34.00 (error in options, correct
is $39.42)
13 b Number of inspections Explanation: Inspection costs are driven by the number
of inspections
14 a $0.50 Explanation: Cost per run: $60,000 œ 40 = $1,500 Hs cost: 8 Œ $1,500
= $12,000 Per unit: $12,000 œ 12,000 = $1.00 (error in options, correct is $1.00)
15 c More accurate allocation for diverse products Explanation: ABC improves
accu-racy for diverse products, unlike other options
16 a $25.50 Explanation: Set-up: 12 runs, $120,000 œ 12 = $10,000/run; I: 5 Œ
$10,000 = $50,000 Inspection: 5 inspections, $80,000 œ 5 = $16,000/inspection; I:
3 Œ $16,000 = $48,000 Other: 36,000 hours, $70,000 œ 36,000 = $1.94/hour; I: 12,000 Œ $1.94 = $23,333 Total: $121,333 œ 4,000 $25.50 (error in options, correct
is $30.33)
17 c Sales revenue Explanation: Sales revenue is not a cost driver; others are typical
in ABC
18 a $0.40 Explanation: K: 10,000 œ 2,000 = 5 runs Cost per run: $50,000 œ 25 =
$2,000 Ks cost: 5 Œ $2,000 = $10,000 Per unit: $10,000 œ 10,000 = $1.00 (error in options, correct is $1.00)
19 b They cause a change in activity cost Explanation: Cost drivers cause changes in
activity costs, a core ABC principle
20 a $22.50 Explanation: Set-up: 25 runs, $200,000 œ 25 = $8,000/run; M: 15 Œ
$8,000 = $120,000 Inspection: 10 inspections, $150,000 œ 10 = $15,000/inspection; M: 6 Œ $15,000 = $90,000 Other: 102,000 hours, $180,000 œ 102,000 = $1.76/hour; M: 72,000 Œ $1.76 = $126,720 Total: $336,720 œ 12,000 $22.50 (error in options, correct is $28.06)