Question 1 : Function-based costing

JIM Ltd has identified the following overhead costs and cost drivers for next year

Expenses /cost	Expected ( cost) $
Selling cost	25,000
Administration Cost	45,000
Manufacturing overhead cost	78,000
Utilities cost [store]	12,000
Cost Drivers:
Product X	Machine Hours
Product Y	Direct Labour Hours
Direct Labour Hours	14,000 hours
Machine Hours	15,000 hours

The following is the cost of 2 products made by the company:

	Product X	Product Y
Direct materials	$4200	$2600
Direct Labor Hour Rate	$10.50	$16.50
Units completed	150	100
DLH (hours)	560	420
Machine hours	660	240
Actual Cost	$ 4200	$2100

REQUIRED

1. Calculate the Predetermined Rate [PR] for product X using machine hours and product Y using direct labour hours

2. What is the applied cost assigned to product X and product Y?

3. Calculate the total product cost using FBC for both products

4. Calculate the unit cost for each product

5. Is the applied cost for product X under or over-applied? What effect this will have on the cost of goods sold and the Net income ?

6. Is the applied cost for product Y under or over-applied? What effect this will have on the cost of goods sold and the Net income