Distinguish between Traditional costing method and Activity Based Costing. (5 marks) The following information is presented...
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Distinguish between Traditional costing method and Activity Based Costing. (5 marks) The following information is presented for Books Ltd for the forthcoming period: Products Production & Sales Quantity Selling price per unit Leading cost per unit 4 Machine Department (machine hours per unit) 6 Cost Pool Assembly Department (direct labour hour per unit) 6 Machining services Assembly services Cost pools for the overheads can be determined as: Set-up costs Order processing A 50,000 Procurement costs P65 P52 Products No. of set-ups Client orders Purchase orders Over heads allocated and apportioned to production departments (including service cost centre costs) were to be recovered in product cost as follows: Machine department at £ 0.90 per machine hour Assembly department at £ 0.60 per direct labour hour. P 415,000 320,000 (10 marks) b) Activity based costing (15 marks) 45,000 230,000 B 80,000 85,000 P100 P85 A 210 7,000 4,000 Required: Prepare the profit statement using: a) Traditional absorption costing 3 Cost Driver Machine hours The following estimates are available for the period: Direct labour hours Set-ups Client orders Purchase orders B 190 5,500 5,600 C 100,000 P80 P70 7 LO 5 Period quantity 790,000 800,000 1,500 66,000 20,000 C 320 19,000 7,000 Distinguish between Traditional costing method and Activity Based Costing. (5 marks) The following information is presented for Books Ltd for the forthcoming period: Products Production & Sales Quantity Selling price per unit Leading cost per unit 4 Machine Department (machine hours per unit) 6 Cost Pool Assembly Department (direct labour hour per unit) 6 Machining services Assembly services Cost pools for the overheads can be determined as: Set-up costs Order processing A 50,000 Procurement costs P65 P52 Products No. of set-ups Client orders Purchase orders Over heads allocated and apportioned to production departments (including service cost centre costs) were to be recovered in product cost as follows: Machine department at £ 0.90 per machine hour Assembly department at £ 0.60 per direct labour hour. P 415,000 320,000 (10 marks) b) Activity based costing (15 marks) 45,000 230,000 B 80,000 85,000 P100 P85 A 210 7,000 4,000 Required: Prepare the profit statement using: a) Traditional absorption costing 3 Cost Driver Machine hours The following estimates are available for the period: Direct labour hours Set-ups Client orders Purchase orders B 190 5,500 5,600 C 100,000 P80 P70 7 LO 5 Period quantity 790,000 800,000 1,500 66,000 20,000 C 320 19,000 7,000
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a Traditional Absorption Costing To prepare the profit statement using traditional absorption costing we allocate overhead costs to products based on a predetermined overhead rate The predetermined ov... View the full answer
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Managerial Accounting A Focus on Ethical Decision Making
ISBN: 978-0324663853
5th edition
Authors: Steve Jackson, Roby Sawyers, Greg Jenkins
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