M/s. Ghala LLC produces five products, A, B, C, D and E, all from the same...

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M/s. Ghala LLC produces five products, A, B, C, D and E, all from the same material. Until now, it has used traditional absorption costing to allocate overheads to its products. The company is now considering an activity-based costing in the hope that it will improve profitability. Information for the three products for the last year is as follows; Particulars Production and Sales Volumes (Units) Selling Price Per Unit (RO) Raw Material Usage (Kg) Per Unit Direct Labor Hours Per Unit Machine Hours Per Unit No of Production Runs Per Annum No of Purchase Orders Per Annum C D 35K 40K 13.5 15.5 4.5 0.25 0.9 18 Machine set up costs Machine running costs Procurement costs Delivery costs A B 30K 25K 7.5 12.5 2.5 3.5 3.5 0.15 0.20 0.15 0.5 0.7 0.9 32 24 16 48 56 84 96 60 124 E 20K 14.5 4.5 0.25 0.10 No of Deliveries to Retailers Per Annum The price for raw material remained constant throughout the year at RO 2.500 per Kg. Similarly, the direct labor costs for the who workforce was RO15.500 per hour. The annual overhead costs were as follows; Particulars RO 65,555 76,666 58,488 64,556 20 80 90 80 100 Required: Calculate the full cost per unit for products A, B and C under traditional absorption, using direct labor hours as the basis for apportionment. Calculate the full cost per unit of each product using activity based costing. Also comment it. M/s. Ghala LLC produces five products, A, B, C, D and E, all from the same material. Until now, it has used traditional absorption costing to allocate overheads to its products. The company is now considering an activity-based costing in the hope that it will improve profitability. Information for the three products for the last year is as follows; Particulars Production and Sales Volumes (Units) Selling Price Per Unit (RO) Raw Material Usage (Kg) Per Unit Direct Labor Hours Per Unit Machine Hours Per Unit No of Production Runs Per Annum No of Purchase Orders Per Annum C D 35K 40K 13.5 15.5 4.5 0.25 0.9 18 Machine set up costs Machine running costs Procurement costs Delivery costs A B 30K 25K 7.5 12.5 2.5 3.5 3.5 0.15 0.20 0.15 0.5 0.7 0.9 32 24 16 48 56 84 96 60 124 E 20K 14.5 4.5 0.25 0.10 No of Deliveries to Retailers Per Annum The price for raw material remained constant throughout the year at RO 2.500 per Kg. Similarly, the direct labor costs for the who workforce was RO15.500 per hour. The annual overhead costs were as follows; Particulars RO 65,555 76,666 58,488 64,556 20 80 90 80 100 Required: Calculate the full cost per unit for products A, B and C under traditional absorption, using direct labor hours as the basis for apportionment. Calculate the full cost per unit of each product using activity based costing. Also comment it.

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Calculation of the Overhead Rate based on Direct Labor Hours Total Direct Labor Hours 015 30000 015 ... View the full answer