Fredy specialises in the manufacture of tablets, laptops and desktop PCs. FG currently operates a standard...

  

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Fredy specialises in the manufacture of tablets, laptops and desktop PCs. FG currently operates a standard absorption costing system. Budgeted information for next year is given below: Laptops Desktop PCs $000 12,480 2,800 1,200 Products Tablets Total Sales revenue $000 3,640 $000 9,880 2,200 $000 26,000 5,800 2,300 Direct material Direct labour 800 Fixed production 300 800 overheads Gross profit 1.456 1,084 4.992 3,488 3.952 2,928 10.400 7,500 Fixed production overheads are currently absorbed based on a percentage of sales revenue. Fredy is considering changing to an activity based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows: Activity Cost Driver Production overhead cost $000 Manufacturing scheduling Parts handling Assembly Software installation & testing Number of orders 162 Number of parts Assembly time 2,464 4,472 Number of software 2,000 applications Packaging Number of units 1.302 10.400 Further details have also been ascertained as follows: Laptops Desktop PCs 12,000 Tablets Budgeted production for next year (units) 10,000 6,000 Number of orders 1,000 200,000 2,000 420,000 1,500 150,000 Number of parts Assembly time per unit (minutes) Number of software applications per unit 20 40 30 20,000 36,000 24,000 REQUIRED: (a) Calculate the total gross profit for each product using the proposed activity based costing system. (16 marks) Fredy specialises in the manufacture of tablets, laptops and desktop PCs. FG currently operates a standard absorption costing system. Budgeted information for next year is given below: Laptops Desktop PCs $000 12,480 2,800 1,200 Products Tablets Total Sales revenue $000 3,640 $000 9,880 2,200 $000 26,000 5,800 2,300 Direct material Direct labour 800 Fixed production 300 800 overheads Gross profit 1.456 1,084 4.992 3,488 3.952 2,928 10.400 7,500 Fixed production overheads are currently absorbed based on a percentage of sales revenue. Fredy is considering changing to an activity based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows: Activity Cost Driver Production overhead cost $000 Manufacturing scheduling Parts handling Assembly Software installation & testing Number of orders 162 Number of parts Assembly time 2,464 4,472 Number of software 2,000 applications Packaging Number of units 1.302 10.400 Further details have also been ascertained as follows: Laptops Desktop PCs 12,000 Tablets Budgeted production for next year (units) 10,000 6,000 Number of orders 1,000 200,000 2,000 420,000 1,500 150,000 Number of parts Assembly time per unit (minutes) Number of software applications per unit 20 40 30 20,000 36,000 24,000 REQUIRED: (a) Calculate the total gross profit for each product using the proposed activity based costing system. (16 marks)

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