You are a management accountant of EON and Brothers Ltd., a two products company that produces manufacturing simultaneously in one of their production plants. You are asked to produce a management report on costing techniques. This company follows a traditional approach to costing and absorbs production overhead using machine hours. The company's policy is to add a 50% markup on the unit cost to obtain the selling price. The relevant information is given below: EON and Brothers Ltd. produces two similar products called Alfa and Beta. Total Overheads = £155,000 Machine Hours = 58980 hrs Product Alfa Beta Production Units 2,580 5,100 Material Cost per unit £31 £51 Labour Cost per unit £21 £17 Machine Hours per unit 11 6 After discussing with all the important people of the production plant you have allocated the overhead costs as mentioned below: % Overheads Set up Costs 30 Inspections 40 Materials Handling 30 Cost Pools are as mentioned below: Alfa Beta Total Setups 400 65 465 Inspections 500 275 775 Goods Movements 625 1,700 2,325 The financial director of EON and Brothers Ltd., is considering replacing the existing traditional system with activity based costing but is unsure exactly what would be involved. He is also determined to keep costs to a minimum and does not want any new system to involve a lot of extra work or expenditure.
You are a management accountant of EON and Brothers Ltd., a two products company that produces manufacturing simultaneously in one of their production plants. You are asked to produce a management report on costing techniques. This company follows a traditional approach to costing and absorbs production overhead using machine hours. The company's policy is to add a 50% markup on the unit cost to obtain the selling price. The relevant information is given below: EON and Brothers Ltd. produces two similar products called Alfa and Beta. Total Overheads = £155,000 Machine Hours = 58980 hrs Product Alfa Beta Production Units 2,580 5,100 Material Cost per unit £31 £51 Labour Cost per unit £21 £17 Machine Hours per unit 11 6 After discussing with all the important people of the production plant you have allocated the overhead costs as mentioned below: % Overheads Set up Costs 30 Inspections 40 Materials Handling 30 Cost Pools are as mentioned below: Alfa Beta Total Setups 400 65 465 Inspections 500 275 775 Goods Movements 625 1,700 2,325 The financial director of EON and Brothers Ltd., is considering replacing the existing traditional system with activity based costing but is unsure exactly what would be involved. He is also determined to keep costs to a minimum and does not want any new system to involve a lot of extra work or expenditure.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:company
You are a management accountant of EON and Brothers Ltd., a
manufacturing
that produces two products
simultaneously in one of their production plants. You are asked to
produce a management report on costing techniques. This
company follows a traditional approach to costing and absorbs
production overhead using machine hours. The company's policy
is to add a 50% markup on the unit cost to obtain the selling
price.
The relevant information is given below:
EON and Brothers Ltd. produces two similar products called Alfa
and Beta.
Total Overheads = £155,000
Machine Hours = 58980 hrs
Product
Alfa Beta
Production Units
2,580 5,100
Material Cost per unit £31 £51
Labour Cost per unit £21 £17
Machine Hours per unit 11 16
After discussing with all the important people of the production
plant you have allocated the overhead costs as mentioned below:
% Overheads
Set up Costs
30
Inspections
40
Materials Handling 30
Cost Pools are as mentioned below:
Alfa Beta Total
Setups
400 65 465
Inspections
500 275 775
Goods Movements 625 1,700 2,325
The financial director of EON and Brothers Ltd., is considering
replacing the existing traditional system with activity based
costing but is unsure exactly what would be involved. He is also
determined to keep costs to a minimum and does not want any
new system to involve a lot of extra work or expenditure.
Transcribed Image Text:1. Design ABC system for EON and Brothers
(discuss steps)
What are the Costs per unit of Alfa and Beta
under traditional and ABC costing systems?
What would be the prices of Alpha and Beta
traditional and ABC costing systems?
Compare the costs and prices calculated in the two
systems. for calculation
3. Discuss your recommendation on the viability
of ABC for EON and Brothers Ltd., given the
financial director's concerns.
2.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education