Goodwill LLC manufacturing two products, A and B. The company currently adopts traditional method of charging overheads to the products based on labour hours. The company now wishes to adopt the Activity Based Costing method of allocating overheads, to do its product costing accurately. The company furnishes the following data for a year: Product A Product B Direct material @ RO 5 per Kg 6 Kgs 5 Kgs Direct Labour @ RO 10 per hour 4.5 hours 5 hours Product Annual Output (units) Total machine hours Total number of purchase orders Total number of set ups A 100 500 50 5 B 75 700 40 10 The annual overheads are as under: Volume related activity costs RO 20,000 Set up related costs RO 15,000 Purchase related costs RO 35,000 Total RO 70,000 Based on the above information, answer the following questions: The activity cost driver rate for purchase related cost is: a. RO 588.89 per order b. RO 288.89 per order c. RO 388.89 per order d. RO 488.89 per order Clear my choice The activity cost driver rate for set up is: a. RO 1300 per set up b. RO 1000 per set up c. RO 1500 per set up d. RO 1200 per set up The cost per unit as per traditional method using direct labour hour as basis for product A and B is: a. RO 453.83 and RO 422.89 b. RO 456.83 and RO 499.25 c. RO 455.83 and RO 458.89 d. RO 450.80 and RO 423.80

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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Goodwill LLC manufacturing two products, A and B. The company currently adopts traditional method of charging overheads to the products based on labour hours. The company now wishes to adopt the Activity Based Costing method of allocating overheads, to do its product costing accurately. The company furnishes the following data for a year:

	Product A	Product B
Direct material @ RO 5 per Kg	6 Kgs	5 Kgs
Direct Labour @ RO 10 per hour	4.5 hours	5 hours

Product	Annual Output (units)	Total machine hours	Total number of purchase orders	Total number of set ups
A	100	500	50	5
B	75	700	40	10

The annual overheads are as under:

Volume related activity costs RO 20,000

Set up related costs RO 15,000

Purchase related costs RO 35,000

Total RO 70,000

Based on the above information, answer the following questions:

The activity cost driver rate for purchase related cost is:

RO 588.89 per order

RO 288.89 per order

RO 388.89 per order

RO 488.89 per order

Clear my choice

The activity cost driver rate for set up is:

RO 1300 per set up

RO 1000 per set up

RO 1500 per set up

RO 1200 per set up

The cost per unit as per traditional method using direct labour hour as basis for product A and B is:

RO 453.83 and RO 422.89

RO 456.83 and RO 499.25

RO 455.83 and RO 458.89

RO 450.80 and RO 423.80

The cost per unit as per traditional method using machine hour as basis for product A and B is:

RO 366.65 and RO 464.56

RO 388.65 and RO 450.50

RO 300.65 and RO 425.50

RO 380.65 and RO 450.65

Clear my choice

The predetermined overhead rate as per traditional method based on Direct Labour Hours is:

RO 80.85 per hour

RO 85.84 per hour

RO 85.80 per hour

RO 84.85 per hour

Clear my choice

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The predetermined overhead rate as per traditional method based on machine hours is:

RO 84.85 per hour

RO 58.33 per hour

RO 56.33 per hour

RO 85.33 per hour

The total cost per unit as per ABC method for product A and B is:

RO 428.53 and RO 536.95

RO 400.53 and RO 523.95

RO 415.50 and RO 580.95

RO 420.50 and RO 500.95

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