Question 2 ABC Ltd, has a single manufacturing process of which the following overhead cost estimates...

 

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Question 2 ABC Ltd, has a single manufacturing process of which the following overhead cost estimates are available for the period ending 31 December 20X2: R Raw materials receiving and inspection cost 18 720 Electricity 23 400 Materials handling cost 16 380 Total 58 500 Three products, namely A, B and C, are manufactured by labourers. The raw material arrives in bundles and is then processed further using electrical drills, which are operated by hand. The labourers are paid a wage of R50 per hour. The following estimates are applicable for the period ending 31 December 20X2: Product A Product B Product C Units manufactured 2 200 1 650 880 Raw material received (total bundles) 11,00 6,00 18,00 Data per manufactured unit: Direct material (m2) 4,00 6,00 3,00 Direct material (R) 6,50 3,90 7,80 Direct labour (minutes of drilling) 24,00 40,00 60,00 Number of electric diling jobs 7,00 4,00 3,00 Overheads are currently allocated to products by means of a rate based on labour hours. An activity-based investigation identified the following cost drivers: Activity cost pool Cost drivers Material receiving and inspection Number of material bundles Electricity Number of drilling jobs Material handling m2 handled Round off all your figures to two decimal places. 2,1 Prepare a summary for the budgeted product cost per unit for each product (A, B and C) for the period ending 31 December 20X2, where the unit cost for each of the cost elements is set out: (8 marks) In terms of the current method of overhead allocation 2.2 Prepare a summary for the budgeted product cost per unit for each product (A, B and C) for the (12 marks) period ending 31 December 20X2, where the unit cost for each of the cost elements is set out by using the identified cost drivers and on the basis of ABC principles Question 2 ABC Ltd, has a single manufacturing process of which the following overhead cost estimates are available for the period ending 31 December 20X2: R Raw materials receiving and inspection cost 18 720 Electricity 23 400 Materials handling cost 16 380 Total 58 500 Three products, namely A, B and C, are manufactured by labourers. The raw material arrives in bundles and is then processed further using electrical drills, which are operated by hand. The labourers are paid a wage of R50 per hour. The following estimates are applicable for the period ending 31 December 20X2: Product A Product B Product C Units manufactured 2 200 1 650 880 Raw material received (total bundles) 11,00 6,00 18,00 Data per manufactured unit: Direct material (m2) 4,00 6,00 3,00 Direct material (R) 6,50 3,90 7,80 Direct labour (minutes of drilling) 24,00 40,00 60,00 Number of electric diling jobs 7,00 4,00 3,00 Overheads are currently allocated to products by means of a rate based on labour hours. An activity-based investigation identified the following cost drivers: Activity cost pool Cost drivers Material receiving and inspection Number of material bundles Electricity Number of drilling jobs Material handling m2 handled Round off all your figures to two decimal places. 2,1 Prepare a summary for the budgeted product cost per unit for each product (A, B and C) for the period ending 31 December 20X2, where the unit cost for each of the cost elements is set out: (8 marks) In terms of the current method of overhead allocation 2.2 Prepare a summary for the budgeted product cost per unit for each product (A, B and C) for the (12 marks) period ending 31 December 20X2, where the unit cost for each of the cost elements is set out by using the identified cost drivers and on the basis of ABC principles

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ABC Ltd Workings for Answer 21 Calculation of Predetermined OH Rate Product A Product B Product C Total Note Units manufactured 220000 165000 88000 A ... View the full answer