Wright Ltd uses an Activity-based Costing (ABC) system to manufacture tractor metal parts. The following budget information relates to Wright Ltd for next year: Activity Activity Cost pool (£) Activity Cost driver Annual number of activity cost drivers Operating machinery 660,000 Machine hours 110,000 Maintaining machinery 80,000 Maintenance hour 1,600 Setting-up machinery 256,000 Machinery set-up 8,000 Purchasing materials 59,850 Purchase order 450 Controlling quality 104,500 Quality inspection 5,500 Total 1,160,350 An order from a customer for 80,000 units of parts caused 14,500 hours of machining, 22 maintenance hours, 20 machinery set-ups, 35 purchase orders, and 12 quality inspections. The order used £50,000 of materials and £65,000 of direct labour. The amount of production overheads attached to this order by the ABC system is: a. £93,623 b. £50,444 c. £72,816 d. £87,220
Wright Ltd uses an Activity-based Costing (ABC) system to manufacture tractor metal parts. The following budget information relates to Wright Ltd for next year:
|
Activity |
Activity Cost pool (£) |
Activity Cost driver |
Annual number of activity cost drivers |
|
Operating machinery |
660,000 |
Machine hours |
110,000 |
|
Maintaining machinery |
80,000 |
Maintenance hour |
1,600 |
|
Setting-up machinery |
256,000 |
Machinery set-up |
8,000 |
|
Purchasing materials |
59,850 |
Purchase order |
450 |
|
Controlling quality |
104,500 |
Quality inspection |
5,500 |
|
Total |
1,160,350 |
|
|
An order from a customer for 80,000 units of parts caused 14,500 hours of machining, 22 maintenance hours, 20 machinery set-ups, 35 purchase orders, and 12 quality inspections. The order used £50,000 of materials and £65,000 of direct labour.
The amount of production
| a. |
£93,623 |
|
| b. |
£50,444 |
|
| c. |
£72,816 |
|
| d. |
£87,220 |
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