i) Define and calculate the marginal costs and throughput costs for each unit of GC and EX products, using the data in Table 1. ii) Calculate the selling price for jobs in both product categories using marginal and throughput costing.
Question 1 – Case Study
Alpha Homes is a private limited company involved in specialist home improvements, with two (2) main products. These are: Garage Conversions (GC) and Extension to Properties (EX). Alpha Homes currently implements the full-costing absorption method in providing price quotes to customers. The company seeks to remain competitive and has an existing policy to price all jobs at budgeted total costs plus 50%.
You are the new management accountant, and currently reviewing the cost records, for materials, labour and overheads.
Table 1 below indicates the expected costs of “jobs” in both product areas:
Table 1
| Cost subheads | Garage Conversion (GC) | Extension to property (EX) |
| Price Quotes (£) Units | ||
| Construction materials (£) | 3500 | 8,000 |
| Labour (£) | 5,500 | 6,500 |
| Fixed Overheads(£) | 1,000 | 2,000 |
| Variable Overheads(£) | 1,000 | 4000 |
Required
a
i) Define and calculate the marginal costs and throughput costs for each unit of
GC and EX products, using the data in Table 1.
ii) Calculate the selling price for jobs in both product categories using marginal and throughput costing.
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