Shine Ltd manufactures two products, Exe and Zed. Currently, overheads are apportioned using a traditional absorption costing basis. You are the cost accountant and from the class discussion on activity based costing (ABC), you are considering its implementation in your company for the purposes of charging overheads to production. The following information has been provided: Type of cost Amount Current basis Volume related costs Sh. 600,000 Machine hours Purchasing related cost Sh.420,000 Labour hours Set-up costs Sh. 360,000 Labour hours   Extracts from the standard costs show the following:   EXE ZED Labour hours per unit 4 2 Machine hours per unit 2 2 Budgeted production next year 20,000 10,000 Number of purchase orders per annum 150 60 Number of machine set-up per annum 70 50       Required: Using ABC system, what is the overhead per unit for product Zed?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Shine Ltd manufactures two products, Exe and Zed. Currently, overheads are apportioned using a traditional absorption costing basis. You are the cost accountant and from the class discussion on activity based costing (ABC), you are considering its implementation in your company for the purposes of charging overheads to production.

The following information has been provided:

Type of cost

Amount

Current basis

Volume related costs

Sh. 600,000

Machine hours

Purchasing related cost

Sh.420,000

Labour hours

Set-up costs

Sh. 360,000

Labour hours

 

Extracts from the standard costs show the following:

 

EXE

ZED

Labour hours per unit

4

2

Machine hours per unit

2

2

Budgeted production next year

20,000

10,000

Number of purchase orders per annum

150

60

Number of machine set-up per annum

70

50

 

 

 

Required:

Using ABC system, what is the overhead per unit for product Zed?

Select one:
A. Sh. 23.5
B.   Sh. 46.0
C. Sh. 45.5
D. None of the above
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