AAT L3 Management Accounting: Costing 2

Question 1

Which of the following is a direct cost?

Accepted Answer

Raw materials used in production

Answer

Direct costs are specifically traceable to a cost unit; raw materials used in production are a direct cost as they can be directly attributed to the product being manufactured.

Question 2

A cost centre is best defined as:

Accepted Answer

A centre where costs are incurred and collected for control and management purposes

Answer

A cost centre is a department, section, or function where costs are accumulated; managers are held accountable only for the costs under their control.

Question 3

Which of the following is a fixed cost?

Accepted Answer

Factory rental payments

Answer

Factory rental is a fixed cost — it does not change with the level of production output within the relevant range. Variable costs (materials, commission, packing) increase with output.

Question 4

Step-fixed (stepped) costs are those that:

Accepted Answer

Remain fixed within a range of activity but jump to a higher level beyond that range

Answer

Step-fixed costs are constant within a range of activity but increase in steps when output exceeds a threshold — for example, supervision costs when an additional supervisor is required at higher production volumes.

Question 5

If selling price is £20 per unit, variable cost is £12 per unit, and fixed costs are £40,000, the breakeven point in units is:

Accepted Answer

5,000 units

Answer

Contribution per unit = £20 − £12 = £8. Breakeven = £40,000 / £8 = 5,000 units.

AAT Level 3 Practice Test

AAT Level 3 Practice Test

AAT L3 Management Accounting: Costing 2