A Level Accounting (9706)•9706/12/M/J/21
Explanation
Rank by increasing fixed overheads per unit under labor constraint
Steps:
- Identify fixed overheads per unit: X = 135, Y = 115, Z = 50.
- Sort in increasing order: Z (50) < Y (115) < X (135).
- Prioritize production starting with lowest fixed overhead product to allocate scarce labor efficiently.
- This sequence balances overhead recovery while respecting labor limits.
Why C is correct:
- C (Z → Y → X) matches increasing fixed overheads order, maximizing profit via absorption costing where lower-burden products first minimize under-absorption expense (fixed overhead variance formula: actual fixed - absorbed fixed).
Why the others are wrong:
- A starts with high-fixed X, causing early under-absorption.
- B starts with high-fixed X, delaying low-burden recovery.
- D skips lowest-fixed Z, disrupting optimal cost sequence.
Final answer: C
Topic: Costs and cost behaviour
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