1 XYZ manufactures four products, namely A, B, C and D using the same plant and process. Following information relates to a production period: Labour Material Direct Machine Cost per unit Labour per unit Time per unit Cost per unit Product Volume 500 1/2 hour 1/4 hour 1/2 hour 1/4 hour 3 5,000 600 5 16 2 hours 1 hour 12 C 7,000 7 15 hours 15 hours 9. Total production overhead recovered by the cost accounting system is analysed under the following headings : Factory overhead applicable to machine-oriented activity 37,425 ; Set-up costs 4,355; Cost of ordering materials 1,920 ; Handling materials 7,580 ; Administration for spare parts 78,600. These overhead costs are absorbed by products on a machine hour rate of 4-60 per hour giving an overhead cost per product of A= 71-20; B = ? 1-20; C = ? 4-80; D = 7-20 However, investigation into the production overhead activities for the period reveals the following totals : Number of orders Number of material handled Number of times Material was Number of spare parts set-ups 1. Period 2 4 10 1 3 1 2 4. 12 4 8 10 27 12 17 Your are required: to compute an overhead cost per product using activity based costing, tracing overheads to production units by means of cost drivers; and disclosed hetween overheads traced by the
1 XYZ manufactures four products, namely A, B, C and D using the same plant and process. Following information relates to a production period: Labour Material Direct Machine Cost per unit Labour per unit Time per unit Cost per unit Product Volume 500 1/2 hour 1/4 hour 1/2 hour 1/4 hour 3 5,000 600 5 16 2 hours 1 hour 12 C 7,000 7 15 hours 15 hours 9. Total production overhead recovered by the cost accounting system is analysed under the following headings : Factory overhead applicable to machine-oriented activity 37,425 ; Set-up costs 4,355; Cost of ordering materials 1,920 ; Handling materials 7,580 ; Administration for spare parts 78,600. These overhead costs are absorbed by products on a machine hour rate of 4-60 per hour giving an overhead cost per product of A= 71-20; B = ? 1-20; C = ? 4-80; D = 7-20 However, investigation into the production overhead activities for the period reveals the following totals : Number of orders Number of material handled Number of times Material was Number of spare parts set-ups 1. Period 2 4 10 1 3 1 2 4. 12 4 8 10 27 12 17 Your are required: to compute an overhead cost per product using activity based costing, tracing overheads to production units by means of cost drivers; and disclosed hetween overheads traced by the
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:(b) Activity based čóšting
. XYZ manufactures four products, namely A, B, C and D using the same plant and process.
Following information relates to a production period :
Material
Direct
Machine
Labour
Volume
Cost per unit Labour per unit
Time per unit
Cost per unit
Product
500
1/2 hour
1/4 hour
5,000
1/2 hour
1/4 hour
3
C
600
16
2 hours
1 hour
12
D
7,000
1 hours
12 hours
Total production overhead recovered by the cost accounting system is analysed under the
following headings :
Factory overhead applicable to machine-oriented activity 37,425 ; Set-up costs 4,355 ; Cost
of ordering materials 1,920 ; Handling materials 7,580 ; Administration for spare parts
78,600.
These overhead costs are absorbed by products on a machine hour rate of 4-60 per hour
giving an overhead cost per product of
A= 1.20; B=개 1·20; C %3D 4.80; D=D 7·20
However, investigation into the production overhead activities for the period reveals the
following totals :
Number of
material
Number of times
Material was
Number of
Number of
orders
handled
spare parts
Period
set-ups
1
4
10
B.
1
4
12
4
8
10
27
12
17
Your are required:
1to compute an overhead cost per product using activity based costing, tracing
overheads to production units by means of cost drivers; and
difforences disclosed between overheads traced by the
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