Writers' Company produces 2 products presently. The information related to manufacturing is given below. WRITERS' Company Yr 2018-19 Fountain Pen Ball point Units 10000 20000 Area occupied (sq feet) 7000 8000 Variable cost – Direct 32 25 Fixed Cost - Direct (per unit) 10 8 Rent - Fixed Cost per month (Indirect - common for all products) 3,00,000.00 1. The Fixed indirect cost of Rent of Rs 3,00,000/- is to be allocated to both the products The company was doing this on the "number of units" basis till now. Please compute cost per unit of each product basis this method. 2. You have researched and advised Writers' Company to have Activity Based Costing and have gathered data to support the allocation of the Fixed indirect cost as follows : Breakup of indirect fixed costs Allocation basis Rent 3,00,000 Area of operations Please compute cost per unit of each product on the new method of allocation
Writers' Company produces 2 products presently. The information related to manufacturing is given below.
|
WRITERS' Company |
|
Yr 2018-19 |
|
|
|
|
Fountain Pen |
Ball point |
|
Units |
|
10000 |
20000 |
|
Area occupied (sq feet) |
|
7000 |
8000 |
|
Variable cost – Direct |
|
32 |
25 |
|
Fixed Cost - Direct (per unit) |
|
10 |
8 |
|
Rent - Fixed Cost per month (Indirect - common for all products) |
3,00,000.00 |
|
1. The Fixed indirect cost of Rent of Rs 3,00,000/- is to be allocated to both the products The company was doing this on the "number of units" basis till now. Please compute cost per unit of each product basis this method.
2. You have researched and advised Writers' Company to have Activity Based Costing and have gathered data to support the allocation of the Fixed indirect cost as follows :
|
Breakup of indirect fixed costs |
|
Allocation basis |
|
|
|
Rent |
3,00,000 |
|
Area of operations |
|
Please compute cost per unit of each product on the new method of allocation
Step by step
Solved in 2 steps
