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EnglandAccountingQuick questions

3.2 Management accounting

Quick questions on Absorption and activity based costing: overhead absorption rates and cost drivers - AQA A-Level Accounting

2short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.

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Budgeted overheads are 60,00060{,}000 and budgeted labour hours are 15,00015{,}000. Calculate the overhead absorption rate per labour hour. [2 marks] 60,00015,000=4\frac{60{,}000}{15{,}000} = 4 per labour hour.
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State what a cost driver is in activity based costing. [1 mark] The factor that causes the cost of an activity (a cost pool) to change, such as the number of set-ups or orders.

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