Duck Ltd. manufactures three products: A, B, and C. The monthly production output and sales of...

 

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Duck Ltd. manufactures three products: A, B, and C. The monthly production output and sales of the products are as follows: Product A: 2,400 units Product B: 2,000 units Product C: 1,200 units The company currently uses direct machine hours as its allocation base for all manufacturing overhead costs. The total estimated overhead cost for next month is £0.932m. Management is now considering switching to an activity-based costing system with four overhead activity cost pools: receiving orders, machine maintenance, processing, and quality control. The appropriate data concerning the estimated overhead costs and predicted activity levels are given below: Activity level A B Activities Estimated Activity driver C overhead costs (£) 42,000 Receiving order No. or orders Machine 50 40 60 Machine 620,000 3600 21,000 7400 maintenance hours Processing 180,000 Labour 6200 18,500 12,00 hours Quality control 90,000 No of 300 220 270 inspection hours Required: i. Calculate the predetermined overhead rate under the traditional costing system. ii. Calculate the overhead cost per unit of each product under the traditional costing system. ii. Calculate the predetermined overhead rates for all activities under the activity-based costing system. iv. Calculate each activity overhead cost per unit of every product under the activity-based costing system. V. Calculate the overhead cost of each product both in total and per unit under the activity-based costing system. Duck Ltd. manufactures three products: A, B, and C. The monthly production output and sales of the products are as follows: Product A: 2,400 units Product B: 2,000 units Product C: 1,200 units The company currently uses direct machine hours as its allocation base for all manufacturing overhead costs. The total estimated overhead cost for next month is £0.932m. Management is now considering switching to an activity-based costing system with four overhead activity cost pools: receiving orders, machine maintenance, processing, and quality control. The appropriate data concerning the estimated overhead costs and predicted activity levels are given below: Activity level A B Activities Estimated Activity driver C overhead costs (£) 42,000 Receiving order No. or orders Machine 50 40 60 Machine 620,000 3600 21,000 7400 maintenance hours Processing 180,000 Labour 6200 18,500 12,00 hours Quality control 90,000 No of 300 220 270 inspection hours Required: i. Calculate the predetermined overhead rate under the traditional costing system. ii. Calculate the overhead cost per unit of each product under the traditional costing system. ii. Calculate the predetermined overhead rates for all activities under the activity-based costing system. iv. Calculate each activity overhead cost per unit of every product under the activity-based costing system. V. Calculate the overhead cost of each product both in total and per unit under the activity-based costing system.