ACCA Applied Knowledge (BT, MA, FA) · Management Accounting (MA)

Material, labour and overhead costs

10 practice questions, each with the answer and an explanation.

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Random questions from this topic, one at a time. You see the answer and the explanation straight after each one.

All 10 questions

  1. A company uses 12,000 units of a component per year. The cost of placing an order is £50 and the annual holding cost is £3 per unit. What is the economic order quantity (EOQ)?
  2. A company uses 150 units of material per day. The lead time is between 6 and 10 days, and the reorder level is set to avoid stock-outs for the maximum usage and maximum lead time. What is the reorder…
  3. Opening inventory is 200 units at £10. Then 300 units are bought at £12 and 400 units are issued to production. Using the weighted average cost method after the purchase, what is the cost of the 400 u…
  4. An employee is paid £12 per hour for a 40-hour week with overtime at time and a half. In one week the employee works 48 hours. What are the gross earnings?
  5. A worker is paid on a piece-rate basis of £0.80 per unit with a guaranteed minimum wage of £320 per week. The worker makes 360 units in one week. What is the pay?
  6. Which of the following is a likely cost of high labour turnover?
  7. A production cost centre has budgeted overheads of £180,000 and budgeted direct labour hours of 20,000. In the period, actual overheads were £184,500 and actual hours were 19,500. What was the overhea…
  8. Using the same data (absorption rate £9 per direct labour hour, actual hours 19,500, actual overheads £184,500), what is the overhead under- or over-absorbed?
  9. A company that uses absorption costing produced 10,000 units and sold 8,000. Fixed production overheads were £50,000 and there was no opening inventory. How much fixed production overhead is carried f…
  10. In a period, a company's inventory rose. By how much will profit under absorption costing differ from marginal costing if inventory rose by 1,500 units and fixed overhead absorbed is £8 per unit?

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