Product Volume Material cost per unit (R) Direct Labour Cost per unit (R) Machine Time per unit (Hours) Rubber Ball 1 000 5.00 5.50 0.35 Leather Ball 700 20.00 2.00 1.00 Total production Overheads are as follows: Machine department: R50 000 (machine hours is the cost driver) Set‐up costs: R5 000 Ordering Costs‐materials: R2 000 Handling materials: R8 000 An analysis of production overhead activities for the period for the volume of products manufactured revealed the following: Product # set‐ups # material orders # times material were handled Rubber Ball 1 1 2 Leather Ball 2 1 3 Calculate the total budgeted product cost per unit for the Rubber Ball using Activity Based Costing (ABC). Round all answers to two decimal places.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Product Volume Material cost
per unit (R)
Direct Labour
Cost per unit
(R)
Machine Time
per unit
(Hours)
Rubber Ball 1 000 5.00 5.50 0.35
Leather Ball 700 20.00 2.00 1.00
Total production
Machine department: R50 000 (machine hours is the cost driver)
Set‐up costs: R5 000
Ordering Costs‐materials: R2 000
Handling materials: R8 000
An analysis of production overhead activities for the period for the volume of
products manufactured revealed the following:
Product # set‐ups # material orders # times material were handled
Rubber Ball 1 1 2
Leather Ball 2 1 3
Calculate the total budgeted product cost per unit for the Rubber Ball using
Activity Based Costing (ABC). Round all answers to two decimal places.
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