ACCA F5 - Performance Management
UPDATED Exam Questions and
CORRECT Answers
What is cost accounting? - Correct Answer- analyses past, present and future data for the
management accountant to use
What is costing? - Correct Answer- the process of determining the costs of products, services
o...
What is cost accounting? - Correct Answer- analyses past, present and future data for the
management accountant to use
What is costing? - Correct Answer- the process of determining the costs of products, services
or activities.
Methods include absorption costing and process costing.
What is absorption costing and what are the steps? - Correct Answer- method of sharing out
overheads incurred amongst units produced.
1. Allocation
2. Apportionment
3. Absorption
Reasons to use absorption costing? - Correct Answer- 1. Inventory valuations
2. Pricing decisions
3. Establishing profitability of products
Compare advantages for Absorption and Marginal costing - Correct Answer- Absorption:
1. when sales fluctuate due to seasonality, absorption avoids large fluctuations in profit
2. marginal costing fails to recognise importance of working to full capacity
3. prices based on marginal costing dont guarantee contribution will cover fixed costs
Marginal:
1. shows how cashflows and profits are affected by changes in sales volume
2. profits can be manipulated with absorption costing
3. separating fixed and variable costs is vital for decision making
, Inadequacies of absorption costing - Correct Answer- 1. implies all overheads are related to
production volume
2. developed when organisation produced narrow range of products
3. allocates too high proportion of overheads to higher volume products
Outline of activity based costing system - Correct Answer- 1. identify major activies
2. use cost allocation and apportionment methods to these activites (cost pools)
3. Identify the cost drivers which determine the size of the costs of each activity
4. for each activity, calculate absorption rate per unit of cost driver
5. charge overheads to produdcts on the basis of their usage
Cost driver - Correct Answer- 1. volume related for costs that vary with production volume in
the short-term
2. transactions in support departments for other costs
Merits of ABC - Correct Answer- 1. simple
2. focus attention on cost drivers
3. absorption rates more closely linked to causes of overheads
Criticisms of ABC - Correct Answer- 1. More complex
2. Can one cost driver explain the behaviour of all in a pool?
3. cost drivers might be difficult to identify
Target Costing - Correct Answer- Found by identifying the target selling price and then
deducting the required profit margin
Cost gap - Correct Answer- target cost is lower than estimated cost
Life Cycle Costing - Correct Answer- Tracks costs over entire life:
1. Development
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller MGRADES. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.99. You're not tied to anything after your purchase.
