Bristol Electronics produces wide range of electronic products. The company has a labour based costing system that was introduced in the 1970s and is now considering implementing an activity based costing (ABC) system. Managers are concerned about how they should compare the ABC data with the existing costing system.
Selected data from the management accounts for the year ending 31^st December 2017.

Cost data
Total manufacturing overhead for year	£1,000,000
Total hours for year	60,000 hours
Direct labour cost per hour	£10

Data for 3 products only

	Product A	Product B	Product C
Annual production	1,000 units	2,000 units	5,000 units
Material cost per unit	£5.00	£6.00	£7.00
Direct labour hours per unit	1.00	1.50	0.50

ABC data for all products
Cost pool/driver	Annual costs (£s)	Annual volume
Number of set-ups	200,000	1,000
Inspection time (hours)	500,000	3,000
Machine maintenance (hours)	100,000	5,000
Number of purchases	100,000	500
Number of shipments	100,000	500
	1,000,000

ABC data 3 products	Product A	Product B	Product C
Number of set-ups	20	180	30
Inspection time (hours)	20	50	300
Machine maintenance (hours)	30	40	20
Number of purchases	3	4	5
Number of shipments	3	4	6

Determine the total overhead cost for Product A using the using the activity based data.

Answer rating: 100% (QA)

Solution Activity Rate Determination Cost pooldriver ... View the full answer