Jazz Ltd produces two products X and Y. The enterprise produces both products with the same equipment.
Question:
Jazz Ltd produces two products X and Y. The enterprise produces both products with the
same equipment. Details of the cost activities are as follows:
Overhead cost:
Rand
Material handling 200 000
Material procurement 25 000
Set-up cost 120 000
Quality control 200 000
Production 700000
Total 1245 000
Cost driver analysis
Type of overhead (Type of cost driver)X Y Total
Material handling (material movements) 150 100 250
Material procurement (number of orders) 220 110 330
Set-ups (number of set-ups) 40 60 100
Quality control (number of inspections) 100 130 230
Production (Direct labour hours) 30 000 20 000 50000
Annual output
Product X 100 000 units
Product Y 12 000 units
Required:
Calculate the overhead cost per product (per unit) using:
a.A traditional absorption costing system using labour hours for application'
b. An activity base costing system
Expert Answer:
Answer a Overhead cost per product using traditional absorption costing system Total overhead cost R1245000 Total direct labor hours 50000 hours Overh... View the full answer
