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JAMB Principles of Accounts 1998 Question 27

Question 27

Manufacturing Accounts

The objective of allocating all costs to products is to

  1. A.produce a scientifically accurate cost
  2. B.avoid unallocated overhead and compute total product cost
  3. C.co-ordinate the cost and financial accounts
  4. D.compute the contribution of the product to the final profit.
Show the answer and explanation

Answer: B (avoid unallocated overhead and compute total product cost)

Explanation

Absorption costing charges every cost, including overheads, to products so that the full (total) cost of each product is known.