expected. In addition, BBB also produces and sells different types of brick to the construction industry. The three types of brick produced are clay, concrete and reclaimed bricks. BBB has a policy to price all jobs at budgeted total cost plus 50%. Overheads are currently absorbed on a labour hour basis. BBB thinks that a switch to activity-based costing (ABC) to absorb overheads would reduce the costs associated with GC and hence make them more competitive. You are provided with the following data: Overhead Annual overhead Activity driver Total number of category $ activities per year Supervisors 120,000 Site visits 500 Planners 140,000 Planning documents 250 Property related 350,000 Labor hours 40,000 A typical GC takes 300 labour hours to complete. A GC requires only one site visit by a supervisor and needs only one planning document to be raised. An EX requires six site visits and five planning documents. Instructions: 1. What are the total overheads assigned to a GC using labour hours to absorb the overheads? 2. What are the total overheads assigned to a GC using ABC principles? 3. What are the total overheads assigned to an EX using ABC principles?!
expected. In addition, BBB also produces and sells different types of brick to the construction industry. The three types of brick produced are clay, concrete and reclaimed bricks. BBB has a policy to price all jobs at budgeted total cost plus 50%. Overheads are currently absorbed on a labour hour basis. BBB thinks that a switch to activity-based costing (ABC) to absorb overheads would reduce the costs associated with GC and hence make them more competitive. You are provided with the following data: Overhead Annual overhead Activity driver Total number of category $ activities per year Supervisors 120,000 Site visits 500 Planners 140,000 Planning documents 250 Property related 350,000 Labor hours 40,000 A typical GC takes 300 labour hours to complete. A GC requires only one site visit by a supervisor and needs only one planning document to be raised. An EX requires six site visits and five planning documents. Instructions: 1. What are the total overheads assigned to a GC using labour hours to absorb the overheads? 2. What are the total overheads assigned to a GC using ABC principles? 3. What are the total overheads assigned to an EX using ABC principles?!
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
answer quickly
Transcribed Image Text:Brick by Brick (BBB) is a building business that provides a range of building services
to the public. Recently it has been asked to quote for garage conversions (GC) and
extensions to properties (EX) and has found that it is winning fewer GC contracts than
expected. In addition, BBB also produces and sells different types of brick to the
construction industry. The three types of brick produced are clay, concrete and
reclaimed bricks. BBB has a policy to price all jobs at budgeted total cost plus 50%.
Overheads are currently absorbed on a labour hour basis. BBB thinks that a switch to
activity-based costing (ABC) to absorb overheads would reduce the costs associated
with GC and hence make them more competitive. You are provided with the
following data:
Overhead
Annual overhead
Activity driver
Total number of
category
$
activities per year
Supervisors
120,000
Site visits
500
Planners
140,000
Planning documents
250
Property related
350,000
Labor hours
40,000
A typical GC takes 300 labour hours to complete. A GC requires only one site visit by a
supervisor and needs only one planning document to be raised. An EX requires six site
visits and five planning documents.
Instructions:
1. What are the total overheads assigned to a GC using labour hours to absorb the
overheads?
2. What are the total overheads assigned to a GC using ABC principles?
3. What are the total overheads assigned to an EX using ABC principles?
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