Peter Ltd produces two products, Small and Large. The company currently absorbs overheads on the basis of units produced, but they have read about a method based on activities undertaken and have asked you to help them investigate the method. The output is Small  15,000 and Large 12,000. The company has provided the following information Overhead activity     Annual costs             Cost driver      Amount of activity                                                                                                     Small      Large Production                £129,800       Machine hours              1260        1100 Quality inspection      £58,080     No. of production runs   80             30 Material purchased    £71,820      Purchase orders             30            12 Deliveries to retailers £18,080      Shipments                       20             12     a)      Produce a statement showing the overhead split using Activity Based Costing. Show the amount per unit produced.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Peter Ltd produces two products, Small and Large. The company currently absorbs overheads on the basis of units produced, but they have read about a method based on activities undertaken and have asked you to help them investigate the method.

The output is Small  15,000 and Large 12,000.

The company has provided the following information

Overhead activity     Annual costs             Cost driver      Amount of activity

                                                                                                    Small      Large

Production                £129,800       Machine hours              1260        1100

Quality inspection      £58,080     No. of production runs   80             30

Material purchased    £71,820      Purchase orders             30            12

Deliveries to retailers £18,080      Shipments                       20             12

 

 

a)      Produce a statement showing the overhead split using Activity Based Costing. Show the amount per unit produced.

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