Coalition Plc has decided to adopt a more modern approach to overhead recovery-activity based costing from...
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Coalition Plc has decided to adopt a more modern approach to overhead recovery-activity based costing from the coming accounting period onwards. Four products are currently produced and sold by the company. The following details have been given to you by the Chief Management Accountant concerning the four products. Product Output in units Costs per unit: Direct material Direct labour Alpha 1,200 (a) (b) (c) £ 20 14 Bravo 1,000 £ 25 11.50 3 Cost pool Set up costs £ 52,500 104,300 Machine department costs Stores receiving costs Inspection/Quality control costs 36,000 21,000 Materials handling and dispatch costs 46,200 Charlie 800 £ 15 7 Machine hours (per unit) 4 The four products, because of their similarities are produced in production runs of 25 units. Up to now overheads have been absorbed to the four products on the basis of machine hours. You ascertain that these overheads could be analysed into 'cost pools' as follows: 2 Delta 1,200 £ 30 11.50 3 Cost driver Number of production runs Machine hours Requisitions raised Number of production runs Orders executed The number of requisitions raised on the stores was 200 for each product and the number of orders executed was 42, each being for a batch of 100 of a product. Required: Calculate the unit and total cost of each product if all overheads are absorbed using machine hours method. 8 Marks Calculate the unit and total cost of each product if all overheads are absorbed using activity based costing. Comments on your results of (a) and (b) above 12 Marks 5 Marks Total Marks: 25 Coalition Plc has decided to adopt a more modern approach to overhead recovery-activity based costing from the coming accounting period onwards. Four products are currently produced and sold by the company. The following details have been given to you by the Chief Management Accountant concerning the four products. Product Output in units Costs per unit: Direct material Direct labour Alpha 1,200 (a) (b) (c) £ 20 14 Bravo 1,000 £ 25 11.50 3 Cost pool Set up costs £ 52,500 104,300 Machine department costs Stores receiving costs Inspection/Quality control costs 36,000 21,000 Materials handling and dispatch costs 46,200 Charlie 800 £ 15 7 Machine hours (per unit) 4 The four products, because of their similarities are produced in production runs of 25 units. Up to now overheads have been absorbed to the four products on the basis of machine hours. You ascertain that these overheads could be analysed into 'cost pools' as follows: 2 Delta 1,200 £ 30 11.50 3 Cost driver Number of production runs Machine hours Requisitions raised Number of production runs Orders executed The number of requisitions raised on the stores was 200 for each product and the number of orders executed was 42, each being for a batch of 100 of a product. Required: Calculate the unit and total cost of each product if all overheads are absorbed using machine hours method. 8 Marks Calculate the unit and total cost of each product if all overheads are absorbed using activity based costing. Comments on your results of (a) and (b) above 12 Marks 5 Marks Total Marks: 25
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part a a Unit cost based on machine hours absorption Alpha Bravo Charlie Delta Direct material 2000 2500 1500 3000 Direct labor 1400 1150 700 1150 Ove... 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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