Question 3 (7 marks)

a) Discuss the production environment suitable for hybrid costing systems. (3 marks)

ANSWER a):

b) Garbage Disposals Ltd makes two products: Standard and Deluxe. It uses activity-based costing system. It estimates it will produce 300 000 units of Standard and 160 000 of Deluxe, and the overhead for each of its cost pools is as follows:

Cost Pool	Cost Driver	Estimated Overhead
Material receipts	Requisitions	$240 000
Machine setups	Setups	$150 000
Assembly	Parts	$300 000
Machine maintenance	Machine hours	$160 000
		$ 850 000

It has also estimated the activities for each cost driver as follows:

Cost Driver	Standard	Deluxe
Requisitions	350	450
Setups	50	100
Parts	110	140
Machine hours	1500	1700

Required:

Calculate the overhead allocated to each unit of Standard and Deluxe? (4 marks)

ANSWER b):