ACC502: Operations Management Accounting

Question 1 Activity Based Costing 15 marks Comfort Furniture Company (CFC) manufactures two types of tables; Standard and Luxury. The company uses Activity Based Costing (ABC) approach to calculate their product costs. The following information has been provided for the two products: Standard Luxury Direct Materials cost per unit $17 $25 Direct Labour cost per unit ($12 x 4 hours) $48 ($12 x 5 hours) $60 Number of units produced 2 000 5 000 Manufacturing overhead (MOH) costs totaled $800 000. The following six activities contribute to the Company's overall overhead costs: Activities Estimated Activity Driver Standard Luxury Total MOH costs Labour related $80 000 No. of Direct labour hours 10 000 40 000 50 000 Machine setups 150 000 No. of machine setups 3 000 2 000 5 000 Parts 160 000 No. of parts 50 30 80 administration Production orders 70 000 No. of orders 100 300 400 Material receipts 90 000 No. of receipts 150 600 750 General factory 250 000 No. of machine hours 15 000 35 000 50 000 machine hours Total MOH costs $800 000 ACC502SEM Semester 2 2019 Page 3 of 8 Required: Using ABC method: (a) Calculate the overhead rate per unit of activity driver for each activity. (3 marks) (b) Calculate the overhead cost per unit for: i. Standard tables (4 marks) ii. Luxury tables (4 marks) (c) Calculate unit product cost for: i. Standard tables (2 marks) ii. Luxury tables (2 marks)