Palgrave Macmillan: Companion website for Collis - Business Accounting: Chapter 14

Costs can be allocated to a cost centre or cost unit if they are:
1. direct costs
2. indirect costs
3. production overheads
4. other overheads
The reasons for charging costs to cost centres are:
1. to calculate the cost of direct materials
2. to calculate the cost of direct labour
3. to enable overheads to be charged to products
4. to enable the overheads to be charged to management
A cost unit can be:
1. a direct cost
2. an indirect cost
3. a cost centre
4. a batch of products
Overhead absorption rates are based on:
1. budgeted costs
2. forecast costs
3. forecast costs
4. all of these
The actual cost absorbed by a cost unit is calculated using the following formula:
1. actual production x actual absorption rate
2. actual production x budgeted absorption rate
3. budgeted production x actual absorption rate
4. budgeted production x budgeted absorption rate
The total overhead variance is the difference between:
1. the overhead absorbed and the actual overhead
2. the overhead absorbed and the budgeted overhead
3. the budgeted production level and the actual production level
4. the budgeted overhead and the actual overhead

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