ExpertMedium2 marksMultiple Choice
ACCA · Question 12 · Cost Accounting Techniques
Section A
ProConsult, a service firm, uses job costing. For Job #802, direct consultant labor is $4,000 and direct expenses are $500. Production overheads are absorbed at 150% of direct labor cost. Non-production overheads are added at 20% of total production cost. What is the total cost of Job #802?
Section A
ProConsult, a service firm, uses job costing. For Job #802, direct consultant labor is $4,000 and direct expenses are $500. Production overheads are absorbed at 150% of direct labor cost. Non-production overheads are added at 20% of total production cost. What is the total cost of Job #802?
Answer options:
A.
$10,500
B.
$12,600
C.
$11,400
D.
$13,500
How to approach this question
Step 1: Calculate Prime Cost (Labor + Expenses). Step 2: Add Production Overhead to get Total Production Cost. Step 3: Add Non-production Overhead (20% of Total Production Cost) to get Total Cost.
Full Answer
B.$12,600✓ Correct
Prime cost = $4,000 + $500 = $4,500. Production overhead = 150% * $4,000 = $6,000. Total production cost = $4,500 + $6,000 = $10,500. Non-production overhead = 20% * $10,500 = $2,100. Total cost = $10,500 + $2,100 = $12,600.
Common mistakes
Calculating production overhead on prime cost instead of direct labor, or calculating non-production overhead on prime cost.
Practice the full ACCA MA — Management Accounting Practice Exam 3
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