Armidale Company Ltd (ACL) manufactures Special-purpose machines. ACL applies Activity-Based Costing (ABC) to work out the cost
Question:
Armidale Company Ltd (ACL) manufactures Special-purpose machines. ACL applies Activity-Based Costing (ABC) to work out the cost of its products. The following are the primary manufacturing operations with their respective budgeted overhead costs for the month of December 2021:
Activity | Budgeted Cost (total) Cost | Overhead cost allocation base (numbers) |
Handling of Materials | $550000 | parts |
Setting up of Machines | $165000 | setups |
Product assembling | $230000 | parts |
Product packaging | $85000 | finished units |
ACL’s projected production for December, 2021 is 10,000 units, which, in total will use up 250,000 parts, requiring 150 setups of machines.
Required:Work out the following:
a) For each of the four activities mentioned in the question, what is the per activity overhead costs allocation?
b) What are ACL’s cost ‘per machine produced’ and ACL’s ‘total manufacturing cost’ assuming ACL used Direct Materials, the only direct costs, worth $1951 per unit (per machine produced).
Financial Accounting
ISBN: 978-1118978085
IFRS 3rd edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso