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Emerald Ltd produces two products - the ‘Opal’ and the ‘Ruby’. Total overhead costs for the period are £100,000, made up of £80,000 machine set-up costs and £20,000 inspection costs. Overhead is absorbed on the basis of direct labour hours (DLH). Total DLH for the period are 20,000, three quarters of which are used to produce the ‘Opal’ and the remainder used to produce the ‘Ruby’. The machinery for producing the ‘Opal’ only needs to be set up once whereas the ‘Ruby’ requires nine machine set-ups. The ‘Opal’ and the ‘Ruby’ both require two inspections each. Calculate the total overhead to be charged to the ‘Opal’ and the ‘Ruby’ using: (i)  Traditional costing (ii)  Activity-based costing

Emerald Ltd produces two products - the ‘Opal’ and the ‘Ruby’. Total overhead costs for the period are £100,000, made up of £80,000 machine set-up costs and £20,000 inspection costs. Overhead is absorbed on the basis of direct labour hours (DLH). Total DLH for the period are 20,000, three quarters of which are used to produce the ‘Opal’ and the remainder used to produce the ‘Ruby’. The machinery for producing the ‘Opal’ only needs to be set up once whereas the ‘Ruby’ requires nine machine set-ups. The ‘Opal’ and the ‘Ruby’ both require two inspections each. Calculate the total overhead to be charged to the ‘Opal’ and the ‘Ruby’ using: (i)  Traditional costing (ii)  Activity-based costing

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Emerald Ltd produces two products - the ‘Opal’ and the ‘Ruby’. Total overhead costs for the period are £100,000, made up of £80,000 machine set-up costs and £20,000 inspection costs. Overhead is absorbed on the basis of direct labour hours (DLH). Total DLH for the period are 20,000, three quarters of which are used to produce the ‘Opal’ and the remainder used to produce the ‘Ruby’.

The machinery for producing the ‘Opal’ only needs to be set up once whereas the ‘Ruby’ requires nine machine set-ups. The ‘Opal’ and the ‘Ruby’ both require two inspections each.

Calculate the total overhead to be charged to the ‘Opal’ and the ‘Ruby’ using:

  1. (i)  Traditional costing

  2. (ii)  Activity-based costing

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