Wood Limited, a newly established manufacturing company in the Southern Industrial area, manufactures two types of...
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Wood Limited, a newly established manufacturing company in the Southern Industrial area, manufactures two types of Boardroom Tables. One type of these Boardroom tables is sold locally and the other type is exported to Angola. While the designs are identical, the material used is different to cater for the different climatic conditions of the market segments. The two products are produced with the same equipment and they utilise the same overhead resources. In 2021, the company has budgeted to manufacture 60 000 Boardroom Tables for the local market and 40 000 Boardroom Tables for export to Angola. The manufacturing is done in batches of 1 000 Boardroom Tables each. Other details of the company's activities, inputs and outputs are as follows: Analysis of overhead costs Material handling Material procurement Machine set-up Quality control Production NS 200 000 NS 40 000 NS 180 000 NS 270 000 N$ 610 000 Depreciation NS 200 000 TOTAL N$ 1 500 000 Analysis of cost drivers Overhead Cost driver Material movements Local Еxport Material handling Material procurement Machine set-ups Quality control Depreciation 100 60 Number of orders 200 200 Number of set-ups / batch Number of inspections Machine hours / unit Direct labour hours / unit 150 100 5 Production 0.75 0.50 The company management has been using the "traditional costing approach" to allocate overheads between the two products, with direct labour hours as allocation base. They are thinking of applying the Activity-Based Costing System. REQUIRED: Calculate the overhead cost per unit, using; The Traditional Costing Approach The Activity-Based Costing Approach Marks 3.1 3.2 28 Wood Limited, a newly established manufacturing company in the Southern Industrial area, manufactures two types of Boardroom Tables. One type of these Boardroom tables is sold locally and the other type is exported to Angola. While the designs are identical, the material used is different to cater for the different climatic conditions of the market segments. The two products are produced with the same equipment and they utilise the same overhead resources. In 2021, the company has budgeted to manufacture 60 000 Boardroom Tables for the local market and 40 000 Boardroom Tables for export to Angola. The manufacturing is done in batches of 1 000 Boardroom Tables each. Other details of the company's activities, inputs and outputs are as follows: Analysis of overhead costs Material handling Material procurement Machine set-up Quality control Production NS 200 000 NS 40 000 NS 180 000 NS 270 000 N$ 610 000 Depreciation NS 200 000 TOTAL N$ 1 500 000 Analysis of cost drivers Overhead Cost driver Material movements Local Еxport Material handling Material procurement Machine set-ups Quality control Depreciation 100 60 Number of orders 200 200 Number of set-ups / batch Number of inspections Machine hours / unit Direct labour hours / unit 150 100 5 Production 0.75 0.50 The company management has been using the "traditional costing approach" to allocate overheads between the two products, with direct labour hours as allocation base. They are thinking of applying the Activity-Based Costing System. REQUIRED: Calculate the overhead cost per unit, using; The Traditional Costing Approach The Activity-Based Costing Approach Marks 3.1 3.2 28
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Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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