Seven Walls Ltd manufactures two products, Stone and Glass. Budgeted overhead and direct labour hours for the upcoming period are $884,500 and 29,000, respectively. The overhead costs are identified with three major activities: order processing $160,000; machine processing $614,500 and product inspection $110,000. Seven Walls pays its labourer on average $20 per hour. Information about the company’s products are as follows: Stone Estimated production volume: 5,200 Direct material cost per unit: 25 Direct labour hours per unit: 2 Glass Estimated production volume: 6,500 Direct material cost per unit: 40 Direct labour hours per unit: 3 Information about the number of inspections, machine hours and order processed are as follows: Product line Inspection hours Machine hours worked Order processed Stone 1,800 16,100 322 Glass 5,200 19,000 240 Total 7,000 35,100 562 Required: Calculate the unit product costs for Stone and Glass using: Traditional costing, assuming direct labour hours is the allocation base. Activity-based costing.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Seven Walls Ltd manufactures two products, Stone and Glass. Budgeted
|
Stone |
|
|
Estimated production volume: |
5,200 |
|
Direct material cost per unit: |
25 |
|
Direct labour hours per unit: |
2 |
|
Glass |
|
|
Estimated production volume: |
6,500 |
|
Direct material cost per unit: |
40 |
|
Direct labour hours per unit: |
3 |
Information about the number of inspections, machine hours and order processed are as follows:
|
Product line |
Inspection hours |
Machine hours worked |
Order processed |
|
Stone |
1,800 |
16,100 |
322 |
|
Glass |
5,200 |
19,000 |
240 |
|
Total |
7,000 |
35,100 |
562 |
Required:
Calculate the unit product costs for Stone and Glass using:
- Traditional costing, assuming direct labour hours is the allocation base.
- Activity-based costing.
Step by step
Solved in 2 steps with 6 images
