AAT LEVEL 3 - MANAGEMENT
ACCOUNTING: COSTING. EXAM 2025
QUESTIONS AND ANSWERS
What are the three main purposes of cost accounting? - ANS - assisting in making business
decisions
- assisting in making plans for the future
- assisting in controlling expenditure
What is a cost unit? - ANS It is the cost of the increment we are assessing (anything from one
chair to a meter of silk or a bag containing a 100 screws.
What is a cost object? - ANS Anything we want to know the cost of - generally a batch
production of the cost unit, e.g. a day's production.
What is a responsibility centre? - ANS Costs are allocated to different areas of responsibility.
responsibility centres include:
- cost centres
- profit centres
- investment centres
What is the prime cost? - ANS The total of all direct costs.
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Page
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, What are overheads? - ANS The total of all indirect costs.
How are costs classified? - ANS - Element: Material, Labour or Expenses.
- Nature: direct or indirect costs
- Behaviour: Variable, semi-variable, stepped or fixed.
- Function: cost centres
What are the following costs:
Variable
Semi-variable
Stepped
Fixed - ANS Variable = vary in direct proportion to the number of units produced.
Semi-variable = has both elements of fixed and variable costs.
Stepped = a cost that is fixed to a certain level and then fixed again up to another level.
Fixed = costs that don't change regardless of the output.
What is the 'Total Cost Statement' equation? - ANS DIRECT MATERIALS
add
DIRECT LABOUR + DIRECT EXPENSES
equals
PRIME/DIRECT COST
add
PRODUCTION OVERHEADS
equals
PRODUCTION COST
add
2
Page
NON-PRODUCTION OVERHEADS
@COPYRIGHT @THEBRIGHT 2025/2026
ACCOUNTING: COSTING. EXAM 2025
QUESTIONS AND ANSWERS
What are the three main purposes of cost accounting? - ANS - assisting in making business
decisions
- assisting in making plans for the future
- assisting in controlling expenditure
What is a cost unit? - ANS It is the cost of the increment we are assessing (anything from one
chair to a meter of silk or a bag containing a 100 screws.
What is a cost object? - ANS Anything we want to know the cost of - generally a batch
production of the cost unit, e.g. a day's production.
What is a responsibility centre? - ANS Costs are allocated to different areas of responsibility.
responsibility centres include:
- cost centres
- profit centres
- investment centres
What is the prime cost? - ANS The total of all direct costs.
1
Page
@COPYRIGHT @THEBRIGHT 2025/2026
, What are overheads? - ANS The total of all indirect costs.
How are costs classified? - ANS - Element: Material, Labour or Expenses.
- Nature: direct or indirect costs
- Behaviour: Variable, semi-variable, stepped or fixed.
- Function: cost centres
What are the following costs:
Variable
Semi-variable
Stepped
Fixed - ANS Variable = vary in direct proportion to the number of units produced.
Semi-variable = has both elements of fixed and variable costs.
Stepped = a cost that is fixed to a certain level and then fixed again up to another level.
Fixed = costs that don't change regardless of the output.
What is the 'Total Cost Statement' equation? - ANS DIRECT MATERIALS
add
DIRECT LABOUR + DIRECT EXPENSES
equals
PRIME/DIRECT COST
add
PRODUCTION OVERHEADS
equals
PRODUCTION COST
add
2
Page
NON-PRODUCTION OVERHEADS
@COPYRIGHT @THEBRIGHT 2025/2026
