Triple Limited makes three types of gold watch the Diva (D), the Classic (C) and the...

  

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Triple Limited makes three types of gold watch the Diva (D), the Classic (C) and the Poser (P). A traditional product costing system is used at present; although an activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Product D Product C Product P Labour hours Costs relating to set-ups Costs relating to machinery Costs relating to materials handling Costs relating to inspection Total production overhead 1 1 Product D Product C Product P Hours per unit Machine hours 1 1 3 Number of Set ups 75 115 480 670 Total production overheads are $654,500 and further analysis shows that the total production overheads can be divided as follows: % 35 15 -30 100 The following total activity volumes are associated with each product line for the period as a whole Number of inspections 150 Materials Cost per unit (5) 20 12 25 Number of movements of materials 12 21 87 120 180 670 1,000 Production Units 750 Calculate the cost per unit for product P using ABC principles. 1,250 7,000 Triple Limited makes three types of gold watch the Diva (D), the Classic (C) and the Poser (P). A traditional product costing system is used at present; although an activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Product D Product C Product P Labour hours Costs relating to set-ups Costs relating to machinery Costs relating to materials handling Costs relating to inspection Total production overhead 1 1 Product D Product C Product P Hours per unit Machine hours 1 1 3 Number of Set ups 75 115 480 670 Total production overheads are $654,500 and further analysis shows that the total production overheads can be divided as follows: % 35 15 -30 100 The following total activity volumes are associated with each product line for the period as a whole Number of inspections 150 Materials Cost per unit (5) 20 12 25 Number of movements of materials 12 21 87 120 180 670 1,000 Production Units 750 Calculate the cost per unit for product P using ABC principles. 1,250 7,000

Answer rating: 100% (QA)

Activitybased costing ABC is a method that assigns costs to products based on the activities required to produce them It uses multiple cost drivers activities to assign overhead costs to products more ... View the full answer