Page 254 - F2 - MA Integrated Workbook STUDENT 2018-19

Chapter 11

Test your understanding answers

Test your understanding 1

D
Statement (i) provides a definition of a cost driver. Cost drivers for long-term
variable overhead costs will be the volume of a particular activity to which the
cost driver relates, so Statement (ii) is correct. Statement (iii) is also correct. In
traditional absorption costing, standard high-volume products receive a higher
amount of overhead costs than with ABC. ABC allows for the unusually high
costs of support activities for low-volume products (such as relatively higher
set-up costs, order processing costs and so on).

Test your understanding 2

D

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