AAT L3 Management Accounting (Costing) 6

Question 1

The purpose of a bill of materials is to:

Accepted Answer

List the standard quantities of each material required to produce one unit of output

Answer

A bill of materials (BOM) specifies the type and quantity of each raw material and component needed to produce one unit of finished product; it is a key document in standard costing systems.

Question 2

When a business uses time sheets for labour costs, the primary purpose is to:

Accepted Answer

Allocate labour costs to specific jobs, cost centres, or products

Answer

Time sheets record the hours worked by employees on each job or activity; they are the basis for allocating direct labour costs to specific jobs or cost centres and for identifying idle time.

Question 3

Idle time represents:

Accepted Answer

Time when workers are paid but not productively engaged in making products

Answer

Idle time is the time for which employees are paid but during which no productive work is carried out — for example, waiting for materials or machine breakdowns. It is typically treated as an overhead cost.

Question 4

In a standard costing system, a standard cost card sets out:

Accepted Answer

The budgeted unit cost based on standard quantities and prices

Answer

A standard cost card details the standard quantity and price for each element of cost (direct materials, direct labour, variable and fixed overheads) to derive the total standard cost per unit.

Question 5

The direct labour efficiency variance measures:

Accepted Answer

Whether workers took more or less time than standard to produce actual output

Answer

Direct labour efficiency variance = (Standard hours for actual output − Actual hours worked) × Standard rate. A favourable variance means workers were faster than standard; adverse means they took longer.

AAT Level 3 Practice Test

AAT Level 3 Practice Test

AAT L3 Management Accounting (Costing) 6