makes three main products, using broadly the same production meth and equipment for each. A conventional product costing system is used at present, althc an activity-based costing (ABC) system is being considered. Details of the three prod for a typical period are: Hours per unit Product X Product Y Product Z Labour hours ½ 1½ 1 Machine hours 1½ 1 3 Materials per unit £ 20 12 25 Volumes Units 750 1250 7000
makes three main products, using broadly the same production meth and equipment for each. A conventional product costing system is used at present, althc an activity-based costing (ABC) system is being considered. Details of the three prod for a typical period are: Hours per unit Product X Product Y Product Z Labour hours ½ 1½ 1 Machine hours 1½ 1 3 Materials per unit £ 20 12 25 Volumes Units 750 1250 7000
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter12: Activity-based Management
Section: Chapter Questions
Problem 14E: Sanford, Inc., has developed value-added standards for four activities: purchasing parts, receiving...
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![Trimake Limited makes three main products, using broadly the same production methods
and equipment for each. A conventional product costing system is used at present, although
an activity-based costing (ABC) system is being considered. Details of the three products
for a typical period are:
Product X
Product Y
Product Z
Hours per
Labour
hours
1/2
1½
1
Costs relating to set-ups
Costs relating to machinery
Costs relating to materials handling
Costs relating to inspection
Total production overhead
Product X
Product Y
Product Z
unit
Total activities for the period:
75
115
480
670
Machine
hours
1½
1
3
Direct labour costs £6 per hour and production overheads are absorbed on a machine hour
basis. The rate for the period is £28 per machine hour.
Further analysis shows that the total of production overheads can be divided as
follows:
Number of Number of
set-ups
(%)
35
movements
of materials
12
21
87
120
Materials
per unit
£
20
15
30
100%
20
12
25
The following activity volumes are associated with the product line for the period
as a whole.
Volumes
150
180
670
1000
Units
Number of
inspections
750
1250
7000
You are required
(a) You are required to calculate the cost per unit for each product
using conventional methods.
(b)
to calculate the cost per unit for each product using ABC
principles.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F66318fc8-0ad6-4ce3-b166-594a4cfc43a5%2F4ae33fd8-603b-4b94-a96f-151a2b50baa7%2F2nkpsut_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Trimake Limited makes three main products, using broadly the same production methods
and equipment for each. A conventional product costing system is used at present, although
an activity-based costing (ABC) system is being considered. Details of the three products
for a typical period are:
Product X
Product Y
Product Z
Hours per
Labour
hours
1/2
1½
1
Costs relating to set-ups
Costs relating to machinery
Costs relating to materials handling
Costs relating to inspection
Total production overhead
Product X
Product Y
Product Z
unit
Total activities for the period:
75
115
480
670
Machine
hours
1½
1
3
Direct labour costs £6 per hour and production overheads are absorbed on a machine hour
basis. The rate for the period is £28 per machine hour.
Further analysis shows that the total of production overheads can be divided as
follows:
Number of Number of
set-ups
(%)
35
movements
of materials
12
21
87
120
Materials
per unit
£
20
15
30
100%
20
12
25
The following activity volumes are associated with the product line for the period
as a whole.
Volumes
150
180
670
1000
Units
Number of
inspections
750
1250
7000
You are required
(a) You are required to calculate the cost per unit for each product
using conventional methods.
(b)
to calculate the cost per unit for each product using ABC
principles.
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