Bristol Electronics produces wide range of electronic products. The company has a labour based costing system that
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Question:
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 31st 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.
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