The following budgeted information relates to Ashanti Ltd for the next year; Products ABC DEF HIJ Selling
Question:
The following budgeted information relates to Ashanti Ltd for the next year;
Products
ABC DEF HIJ
Selling and production (units) 50,000 40,000 30,000
Selling price (k per unit) 45 95 73
Prime cost (k per unit) 32 84 65
Machine department (machine hrs. per unit) 2 5 4
Assembly department (direct labour hr. per unit) 7 3 2
Overheads allocated and apportioned to production departments were as follows:
Machine department K504, 000
Assembly department K437, 000
You as management accountant has ascertained that the above overheads could be analysed into ‘cost pools’ as follows:
Cost pool K’000 Cost driver quantity for the period
Machine services 345 machine hour 410,000
Assembly services 376 direct labour hours 514,000
Set-up costs 45 set-ups 600
Order processing 200 customer orders 42,000
Purchasing 76 suppliers orders 12,300
You have also been provided with the following estimated under the same budget review period:
Products
ABC DEF HIJ
Number of set-ups 150 240 240
Customer orders 7,200 7,200 12,000
Suppliers’ orders 2,500 1,500 3,000
Required;
Prepare budgeted Income statements using:
(a) Conventional absorption costing; and
(b) Activity based costing
Expert Answer:
CONVENTIONAL ABSORPTION COSTING Ashanti Ltd INCOME STATEMENT DEF HIJ TTAL Sales 2250000 3800000 ... View the full answer
