Having the attention in ICMA course on activity based costing (ABC) you decide to experiment by applyingthe principle of ABC to the four products currently made and sold by your company. Details of the fourproducts and relevant information are given below for one period;ProductABD120Rs.10080120Output in unitsCost per unit:Rs.Rs.Rs.40503060Direct materialDirect labor28211421Machine hour per unit433The four products are similar and are usually produced in production runs of 20 units and sold in batches of10 units.The production overheads are currently absorbed by using a machine hour rate the total of productionoverheads for the period are analyzed as follows:Rs.Machine department costs(rent, business rates, depreciation, and supervision)Setup costsStores receivingInspection / Quality controlMaterial handling and dispatch10,4305,2503,6002,1004,620Act You have ascertained that the Cost Drivers' to be used are listed below for the overhead costs shown:CostsCost DriverSet up costsStores receivingInspection / Quality controlMaterial handling and dispatchNumber of production runsRequisitions raisedNumber of production runsOrders executedThe number of requisitions raised on the store was 20 for each period product and the number of ordersexecuted was 42, each order being for a batch of a product.You are required:a) To calculate the total costs of each product if all overhead costs are absorbed on machine hour basis.b) To calculate the total costs for each product using activity based costing.c) To calculate and list the unit product costs from your figures in (a) and (b) above to show thedifference and to comment briefly on any conclusions which may be drawn and which could haveprofit and pricing implications.

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Description: Having the attention in ICMA course on activity based costing (ABC) you decide to experiment by applyingthe principle of ABC to the four products currently made and sold by your company. Details of the fourproducts and relevant information are given

The question is related to Activity Based Costing. Required 1. Total cost of each product if all…

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You have ascertained that the Cost Drivers' to be used are listed below for the overhead costs shown: Costs Cost Driver Set up costs Stores receiving Inspection / Quality control Material handling and dispatch Number of production runs Requisitions raised Number of production runs Orders executed The number of requisitions raised on the store was 20 for each period product and the number of orders executed was 42, each order being for a batch of a product. You are required: a) To calculate the total costs of each product if all overhead costs are absorbed on machine hour basis. b) To calculate the total costs for each product using activity based costing. c) To calculate and list the unit product costs from your figures in (a) and (b) above to show the difference and to comment briefly on any conclusions which may be drawn and which could have profit and pricing implications.

You have ascertained that the Cost Drivers' to be used are listed below for the overhead costs shown: Costs Cost Driver Set up costs Stores receiving Inspection / Quality control Material handling and dispatch Number of production runs Requisitions raised Number of production runs Orders executed The number of requisitions raised on the store was 20 for each period product and the number of orders executed was 42, each order being for a batch of a product. You are required: a) To calculate the total costs of each product if all overhead costs are absorbed on machine hour basis. b) To calculate the total costs for each product using activity based costing. c) To calculate and list the unit product costs from your figures in (a) and (b) above to show the difference and to comment briefly on any conclusions which may be drawn and which could have profit and pricing implications.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 8CE: Electan Company produces two types of printers. The company uses ABC, and all activity drivers are...

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Having the attention in ICMA course on activity based costing (ABC) you decide to experiment by applying the principle of ABC to the four products currently made and sold by your company. Details of the four products and relevant information are given below for one period; Product A B D 120 100 80 120 Output in units Cost per unit: Rs. Rs. Rs. Rs. Direct material 40 50 30 60 Direct labor 28 21 14 21 Machine hour per unit 4 3 2 3 The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production overheads are currently absorbed by using a machine hour rate the total of production overheads for the period are analyzed as follows: Rs. Machine department costs (rent, business rates, depreciation, and supervision) Setup costs Stores receiving Inspection / Quality control Material handling and dispatch 10,430 5,250 3,600 2,100 4,620
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