A company has numerous products and currently absorbs its production overheads based on labour hours; it has the following information:   G H All products Budget (units) 2,400 3,000   Labour hours (£10/ hour) 1 hour 0.2 hours 1,000,000 Material cost / unit £2.00 £3.50   Material requisitions 4 8 4,000 Number of batches 6 3

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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A company has numerous products and currently absorbs its production overheads based on labour hours; it has the following information:

 

G

H

All products

Budget (units)

2,400

3,000

 

Labour hours (£10/ hour)

1 hour

0.2 hours

1,000,000

Material cost / unit

£2.00

£3.50

 

Material requisitions

4

8

4,000

Number of batches

6

3

10,000

 

Overheads are budgeted as £2,500,000 for production set-up related and £1,200,000 for materials handling and storage related.

 

Required:

Calculate the unit cost for products G and H if the company was to adopt activity based costing and comment on the difference.

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