1) Absorption Costing a) When calculating unit costs under absorption costing principles each cost unit is charged with its direct costs and an appropriate share of the organisation’s total overheads (indirect costs) b) Service cost centres  do not work directly on producing the final product.  c) Service cost centres  not work directly on producing the final product.  d) The direct method of reapportionment is the simplest method and is ideal to use when service cost centres provide services to production cost centres, but not to each other. e) The direct method of reapportionment is not the simplest method and is ideal to use when service cost centres provide services to production cost centres, but to each other. f) THE STEP DOWN METHOD is best used where some service cost centres provide services to other service cost centres, but these services are not reciprocated. 2) Cost centres a) They are sections of the organisation that costs can be charged to and we will use the idea of ‘functional’ analysis (ie different areas of the organisation b) They are sections of the organisation that costs can not be charged to and we will use the idea of ‘functional’ analysis (ie different areas of the organisation c) It can be any function or section of the organisation. In a manufacturing business it can be an entire factory, a department of a factory, or a particular stage in the production process.  d) It can not be any function or section of the organisation. In IT business it can be an entire factory, a department of a factory, or a particular stage in the production process.  3) Profit centre a) They are sections of a business to which costs can be charged, income can be identified, and profit can be calculated. b) They are not sections of a business to which costs can be charged, income can be identified, and profit can be calculated. c) They have both costs and income. d) They do not have both costs and income. 4) Investment centres a) They are sections of the organisation where not only can information on income and costs be gathered, but also information on the amount of investment.  b) They are not sections of the organisation where not only can information on income and costs be gathered, but also information on the amount of investment.  c) It can be measured not just by the level of profit , but also by comparing the profit with the amount invested in that part of the business.  d) It can not be measured not just by the level of profit , but also by comparing the profit with the amount invested in that part of the business.  5) Absorption a) The means of incorporating indirect costs (overheads) into costs of units of output b) The means of incorporating direct costs into costs of units of output c) It can be measured not just by the level of profit , but also by comparing the profit with the amount invested in that part of the business.  d) They are sections of a business to which costs can be charged, income can be identified, and profit can be calculated.

Absorption Costing and reaportionment Quiz- AAT - Management Accounting

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