Test 2

Class : B3B

ACC 320

Costing

Answer all questions and show your workings

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	55,000
Administration Cost	35,000
Manufacturing overhead cost	38,000
Utilities cost [factory]	22,000
Cost Driver	E( actual transactions)
Direct Labour Hours	3500
Machine Hours	9,000

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

	Product X	Product Y
Direct materials	$4200	$3600
Direct Labor Hour Rate	$29.00	$14.00
Units completed	250	210
DLH (hours)	460	320
Machine hours	185	160
Actual Cost $	1500	5100

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 each product under or over-applied?

6. What are the disadvantages of FBC and what solution has been offered as alternative?

[40 marks]