PROBLEM-05 The Aeronautical Ltd. has production facility specializing in jobs for the aircraft components market. The traditional costing system has two direct-cost categories, namely, direct materials and direct manufacturing labour and a single direct cost pool, that is manufacturing overhead allocated on the basis of direct labour hours. The indirect cost allocation rate would have been Tk. 115.00 per direct manufacturing labour hour. Tk. 115 direct manufacturing labour-hours. The company has now decided to replace the single indirect cost pool with five indirect cost pools, representing five activity areas each with its own supervising and budget responsibility. The relevant data are as follows: Activity area Cost driver used as an allocation base Cost allocation rate Material handling Parts Tk. 0.40 Lathe work 0.20 Turns Machine-hours Milling 20.00 Grinding 0.80 Parts Units tested Testing 15.00 Two representative jobs processed under the new system of the facility at the most recent period had the following features: Particulars Job 101 Job 102 Direct material costs per job Tk. 9,700.00 Tk. 59,900.00 Direct manufacturing labour cost per job Tk. 750.00 Tk.11,250.00 Direct manufacturing labour-hours per job 25 375 Parts per job 500 2,000 Turns per job 20,000 60,000 Machine -hours per job 150 1,050 Units per job 10 200 Required: (a) Compute the per unit manufacturing cost of each job under the traditional job-cutting system. (b) Compute the per unit manufacturing costs of each job under the activity-based costing system.
PROBLEM-05 The Aeronautical Ltd. has production facility specializing in jobs for the aircraft components market. The traditional costing system has two direct-cost categories, namely, direct materials and direct manufacturing labour and a single direct cost pool, that is manufacturing overhead allocated on the basis of direct labour hours. The indirect cost allocation rate would have been Tk. 115.00 per direct manufacturing labour hour. Tk. 115 direct manufacturing labour-hours. The company has now decided to replace the single indirect cost pool with five indirect cost pools, representing five activity areas each with its own supervising and budget responsibility. The relevant data are as follows: Activity area Cost driver used as an allocation base Cost allocation rate Material handling Parts Tk. 0.40 Lathe work 0.20 Turns Machine-hours Milling 20.00 Grinding 0.80 Parts Units tested Testing 15.00 Two representative jobs processed under the new system of the facility at the most recent period had the following features: Particulars Job 101 Job 102 Direct material costs per job Tk. 9,700.00 Tk. 59,900.00 Direct manufacturing labour cost per job Tk. 750.00 Tk.11,250.00 Direct manufacturing labour-hours per job 25 375 Parts per job 500 2,000 Turns per job 20,000 60,000 Machine -hours per job 150 1,050 Units per job 10 200 Required: (a) Compute the per unit manufacturing cost of each job under the traditional job-cutting system. (b) Compute the per unit manufacturing costs of each job under the activity-based costing system.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:PROBLEM-05
The Aeronautical Ltd. has production facility specializing in jobs for the aircraft components market. The traditional costing
system has two direct-cost categories, namely, direct materials and direct manufacturing labour and a single direct cost pool, that
is manufacturing overhead allocated on the basis of direct labour hours. The indirect cost allocation rate would have been Tk.
115.00 per direct manufacturing labour hour.
Tk. 115 direct manufacturing labour-hours.
The company has now decided to replace the single indirect cost pool with five indirect cost pools, representing five activity
areas each with its own supervising and budget responsibility. The relevant data are as follows:
Activity area
Cost driver used as an allocation base
Cost allocation rate
Material handling
Parts
Tk. 0.40
Lathe work
0.20
Turns
Machine-hours
Milling
20.00
Grinding
0.80
Parts
Units tested
Testing
15.00
Two representative jobs processed under the new system of the facility at the most recent period had the following features:
Particulars
Job 101
Job 102
Direct material costs per job
Tk. 9,700.00
Tk. 59,900.00
Direct manufacturing labour cost per job
Tk.
750.00
Tk.11,250.00
Direct manufacturing labour-hours per job
25
375
Parts per job
500
2,000
Turns per job
20,000
60,000
Machine -hours per job
150
1,050
200
Units per job
10
Required:
(a) Compute the per unit manufacturing cost of each job under the traditional job-cutting system.
(b) Compute the per unit manufacturing costs of each job under the activity-based costing system.
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