Activity based costing exercise problems and answers includes Brief Questions, Descriptive Questions and Analytical Questions
Cost Statement under Traditional Costing
Particulars |
Products |
||
|
P |
Q |
R |
Direct materials [Output x Usage x RMPU] |
xxxx |
xxxx |
xxxx |
Direct labour [Output x LHPU x Rs] |
xxxx |
xxxx |
xxxx |
Prime cost |
xxxx |
xxxx |
xxxx |
Add: Overhead (based on machine or labour hours): |
|
|
|
Machine or Labour expenses (Hours x rate) |
xxxx |
xxxx |
xxxx |
Total cost |
$xxxx |
$xxxx |
$xxxx |
Output |
xxxx |
xxxx |
xxxx |
Cost per units = Total cost ÷ Output |
$xxxx |
$xxxx |
$xxxx |
Where:
RMPU = raw materials per unit
LHPU = labour hours per unit
SN |
Activities or Transactions |
Cost Drivers |
1. |
Material procurement, Order execution |
No. of order |
2. |
Material handling |
No. of order executed, No. of movement |
3. |
Store |
No. of batch, Requisition raised |
4. |
Materials handling and dispatch |
Order executed, No. materials component, volume |
5. |
Dispatch of goods |
No. of dispatches |
6. |
Schedule cost, Set cost |
Production runs |
7. |
Materials inspections |
No. of inspections |
8 |
Repair and maintenance, short term variable cost |
Machine hours |
9. |
Power |
Horse power |
10. |
Production scheduling |
No. of production scheduling |
11. |
Engineering cost |
No. of set up, No. of product change, No. of tool change |
Calculation of Cost Driver Rate
Activities |
Amount |
Cost Driver (CD) |
Total CD |
CD Rate |
1 |
2 |
3 |
4 |
5 = 2 ÷ 4 |
Machine expenses |
xxxx |
Machine hour |
xxx |
xxx |
Set up cost |
xxxx |
Production runs |
xxx |
xxx |
Store receiving cost |
xxxx |
Requisition raised |
xxx |
xxx |
Quantity control |
xxxx |
Production runs |
xxx |
xxx |
Materials handling |
xxxx |
Order executed |
xxx |
xxx |
Cost Statement under ABC
Particulars |
X |
Y |
Z |
||
Direct materials |
[Output × Usage × MCPU] |
xxxx |
xxxx |
xxxx |
|
Direct labour |
[Output × DLH × Rs] |
xxxx |
xxxx |
xxxx |
|
Prime cost |
xxxx |
xxxx |
xxxx |
||
Add: Overhead (based on ABC) |
|
|
|
||
Machine expenses |
[Machine hour × $xxx] |
xxxx |
xxxx |
xxxx |
|
Set up cost |
[Production runs × $xxx] |
xxxx |
xxxx |
xxxx |
|
Store receiving cost |
[Requisition raised × $xxx] |
xxxx |
xxxx |
xxxx |
|
Quantity control |
[Production runs × $xxx] |
xxxx |
xxxx |
xxxx |
|
Materials handling |
[Order executed × $xxxx] |
xxxx |
xxxx |
xxxx |
|
Total cost |
$xxxxx |
$xxxxx |
$xxxxx |
||
Output |
xxxx |
xxxx |
xxxx |
||
Cost per unit = Total cost ÷ Output |
$xx |
$xx |
$xx |
||
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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 1
The following extracted information is given to you:
Particulars $ Products ® |
O |
P |
Q |
Output in units |
1,000 |
2,000 |
3,000 |
Materials cost per unit |
$16 |
$24 |
$32 |
Required: Direct material cost
[Answer: P = $16,000; Q = $48,000; R = $96,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 2
The following extracted information is given to you:
Particulars $ Products ® |
X |
Y |
Z |
Output in units |
2,000 |
4,000 |
5,000 |
One unit requires usage |
1 |
1.5 |
2 |
Materials cost per unit |
$20 |
$25 |
$30 |
Required: Direct material cost
[Answer: X = $40,000; Y = $150,000; Z = $300,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 3
The following extracted information is given to you:
Particulars $ Products ® |
M |
N |
O |
Output in units |
2,000 |
4,000 |
5,000 |
Labour hour per unit |
1.50 |
1.25 |
0.75 |
Required: Total direct labour hours
[Answer: Total DLH = 11,750 hours]
*M = 3,000; N = 5,000; O = 3,750
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 4
The following extracted information is given to you:
Particulars $ Products ® |
A |
B |
C |
Output in units |
2,000 |
3,000 |
5,000 |
Direct labour hours per unit |
0.50 |
0.75 |
1.25 |
Direct wages rate per hour $35
Required: Total labour cost
[Answer: Total labour cost = $332,500]
*A = 35,000; B = 78,750; C = 218,750
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 5
The following extracted information is given to you:
Particulars $ Products ® |
A |
B |
C |
Output in units |
2,000 |
3,000 |
4,000 |
Machine hours per unit |
0.25 |
0.75 |
0.50 |
Required: Total machine hours
[Answer: TMH = 4,750 hours = (500 + 2,250 + 2,000)]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 6
The following extracted information is available for the month of August:
Particulars $ Products ® |
X |
Y |
Z |
Total machine hour |
4,000 |
5,000 |
6,000 |
Addition information:
Machine operating cost |
Repairs and maintenance |
Set up cost |
Total overhead |
25,000 |
15,000 |
5,000 |
45,000 |
Required: Machine hour rate and total machine cost
[Answer: MHR = $3; TMC = $45,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 7
The following extracted information is given to you:
Activities |
Cost |
Cost Driver |
Procurement |
20,000 |
No. of order |
Repairs |
60,000 |
Machine hours |
Set up related |
18,000 |
No. of production runs |
Other information:
No of order |
Machine hours used |
No. of setup |
40 |
15,000 |
3 |
60 |
15,000 |
6 |
Required: Calculation of cost driver rate
[Answer: CDR = $200; $2 and $2,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 8
The following extracted information is given to you by ABC Manufacturing Company:
Production |
Output in units |
DLH per unit |
MH per unit |
Production runs |
P |
2,500 |
3 |
1.5 |
15 |
Q |
3,000 |
4 |
1.5 |
8 |
R |
4,000 |
4.5 |
2.0 |
12 |
Other information regarding overhead cost and suitable cost driver are given below:
Cost pool |
Amount |
Cost driver |
Schedule cost |
35,000 |
Production run |
Set up cost |
37,625 |
Production run |
Indirect labour cost |
75,000 |
Direct labour hours |
Repair and maintenance |
48,750 |
Machine hours |
Required: Calculation of cost driver rate
[Answer: CDR = $1,000; $1,075; $2 and $3]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 9
EP Textile Mills has following information is related to two different brands:
Activities |
Cost driver |
Cost driver rate |
|
Machine related |
Machine hour |
5 |
|
Purchase related |
No. of purchase order |
500 |
|
Set up related |
No. of set up |
2,100 |
|
Other information:
Products |
Machine hours |
Number of purchase order |
Number of set ups |
P |
2,000 |
80 |
40 |
Q |
5,000 |
160 |
60 |
Required: Total overhead cost based on ABC
[Answer: Total overhead: P = $134,000; Q = 231,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 10
NB Textile Mills has following information is related to two different brands:
Activities |
Cost driver |
Cost driver rate |
|
Machine production cost |
Machine hour |
15 |
|
Schedule cost |
Production runs |
500 |
|
Set up cost |
Production runs |
1,000 |
|
Dispatch cost |
No. of dispatch |
3,000 |
|
Other information:
Products |
Machine hours |
Production runs |
Number of dispatch |
A |
2,000 |
5 |
10 |
B |
3,000 |
7 |
8 |
C |
4,000 |
8 |
12 |
Required: Total overhead cost based on ABC
[Answer: Total overhead: A = $67,500; B = 79,500; C = 108,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 11
CK Rice Mills has following information is related to two different brands:
Brands |
Output in kg |
Materials cost |
Labour cost |
Machine based overhead |
A |
5,000 |
$75,000 |
$50,000 |
$34,000 |
B |
6,000 |
$120,000 |
$90,000 |
$42,000 |
Required: (a) Income statement under traditional costing; (b) Cost per unit (CPU)
[Answer: (a) Total cost: A = $159,000; B = $252,000;
(b) CPU: A = $31.80; B = $42
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
BQ: 12
EP Flour Mills has following information is related to two different brands:
Brands |
Output in kg |
Materials cost per unit |
Labour cost per unit |
Labour based cost |
Flour |
4,000 |
$20 |
$4 |
$30,000 |
White flour |
3,000 |
$18 |
$5 |
$24,000 |
Required: (a) Income statement under traditional costing; (b) Cost per unit
[Answer: (a) Total cost = $126,000 and $105,000;
(b) CPU = $31.50 and = $31]
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Accounting Equation |
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Journal Entries in Nepali |
|
Journal Entries |
|
Journal Entry and Ledger |
|
Ledger |
|
Subsidiary Book |
|
Cashbook |
|
Trial Balance and Adjusted Trial Balance |
|
Bank Reconciliation Statement (BRS) |
|
Depreciation |
|
|
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Financial Accounting and Analysis (All videos) |
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Accounting Process |
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Accounting for Long Lived Assets |
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Analysis of Financial Statement |
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DQ: 1
SK Handicraft Center manufactures handcrafted goods. Following information is available for three different products:
Particulars $ |
Products ® |
O |
P |
Q |
Output |
in units |
1,000 |
2,000 |
7,000 |
Materials cost per unit (MCPU) |
in $ |
8 |
12 |
16 |
Labour cost per unit (LCPU) |
in $ |
12 |
15 |
18 |
Machine hour per unit (MHPU) |
in hour |
4 |
4 |
4 |
Other information:
Materials related cost $88,000
Production run cost $100,000
Customer’s order execution $112,000
Required: (for three products) (a) Direct materials cost; (b) Direct labour cost; (c) Total machine hour
(d) Total machine hour cost; (e) Income statement under traditional costing; (f) Cost per unit
[Answer: (a) $8,000; $24,000 and $112,000;
(b) $12,000; $30,000 and $126,000;
(c) 4,000 hours; 8,000 hours and 28,000 hours; (d) MHR = $7.5;
(e) Total cost $50,000; $114,000 and $448,000;
(f) CPU: O = $50; P = $57 and Q = $64]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
DQ: 2
Hi-life Polymers (P) Ltd manufactures slippers Following data are related to three different brands slippers:
Brands |
Output units |
Materials usage per unit |
Materials cost per unit (MCPU) |
DLH per unit |
X |
25,000 |
1.5 |
$10.00 |
1.0 |
Y |
20,000 |
2.5 |
$8.00 |
2.0 |
Z |
30,000 |
2.0 |
$12.5 |
1.5 |
Direct wages rate per hour $15
Actual overhead incurred:
Materials handling cost |
$50,000 |
|
Indirect labour |
$160,000 |
|
Repairs and maintenance |
$100,000 |
|
|
$310,000 |
|
Required: (a) Value of materials; (b) Total DLH; (c) Total labour cost; (d) Income statement under traditional costing;
(e) Cost per unit
[Answer: (a) $375,000; $400,000 and $750,000;
(b) 25,000 hours; 40,000 hours and 45,000 hours; (c) LHR = $2.82
(d) Total cost $820,500; $11,12,800 and $15,51,900;
(e) CPU: X = $32.82; Y = $55.64 and Z = $51.73]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
DQ: 3
ABC Company (P) Ltd has following information:
Particulars $ Products ® |
P1 |
P2 |
|
The activity costs are: |
|
Output in units |
1,000 |
10,000 |
|
Volume related |
$110,000 |
Machine hour per unit |
2 |
2 |
|
Purchase related |
$120,000 |
DLH per unit |
4 |
4 |
|
Set up related |
$210,000 |
No. of purchase order |
80 |
160 |
|
Total |
$440,000 |
No. of set ups |
40 |
60 |
|
|
|
Required: (1) (a) Cost driver rate; (b) Total overhead under ABC;
(2) What do you mean by traditional costing system?
[Answer: (1) $5; $500 and $2,100; (2) $134,000 and $306,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
DQ: 4
Kohinoor Metal Industries manufactures different kind of auto accessories. The following data are related to four specific products:
Particulars |
A |
B |
C |
D |
Output in units |
500 |
800 |
1,000 |
1,500 |
Prime cost |
$48,000 |
$80,000 |
$86,000 |
$120,000 |
Machine hour per unit |
4 |
6 |
4 |
6 |
No. of production runs |
5 |
7 |
8 |
10 |
No. of dispatch |
10 |
8 |
12 |
15 |
Further information:
Short term variable cost: |
Machine production |
$99,000 |
Machine hour |
Long term variable cost: |
Schedule cost |
$165,000 |
Production runs |
|
Set up cost |
$96,000 |
Production runs |
|
Dispatch of goods |
$137,700 |
No. of dispatch |
Required: (1) Cost driver rate; (2) Total overhead under activity based costing; (3) Cost per unit under ABC
[Answer: (1) $5; $5,500; $3,200 and $3,060;
(2) $132,100; $189,360; $212,320 and $297,900;
(3) $264.20; $236.73; $212.32 and $198.60]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
DQ: 5
Birat Shoes Company has got order for three sizes shoes. Other information is:
Particulars $ |
Products ® |
M |
N |
O |
Output units |
|
420 |
280 |
560 |
Standard usage of raw materials |
|
2 |
4 |
3 |
Materials cost per unit |
(in $) |
$25 |
$15 |
$10 |
DLH per unit |
|
2.5 |
2.0 |
1.5 |
Machine hour per unit |
(hours) |
5 |
4 |
3 |
Selling price per unit |
(in $) |
$430 |
$400 |
$300 |
Production runs |
|
6 |
4 |
8 |
Order executed |
|
21 |
14 |
28 |
Requisition raised |
|
10 |
15 |
20 |
DLH $10 per labour hour
Cost driver and expenses:
|
Amount |
Cost driver |
Volume related cost |
36,750 |
Machine hour |
Set up cost |
101,430 |
No. of production runs |
Store receiving cost |
79,785 |
No. of requisition raised |
Quantity control cost |
36,000 |
No. of production runs |
Materials handling and dispatch |
97,650 |
No. of order executive |
|
$351,615 |
|
Required: (a) Total cost and cost per unit under conventional costing based on labour hour rate
(b) Cost driver rate; (c) Total cost and cost per unit under ABC
[Answer: (a) M = $182,196 and $433.80;
N = $102,771 and $367.04; O = $145,757 and $260.28;
(b) $7.5; $5,635; $1,773; $2,000 and $1,550;
(c) M = $143,340 and $341.29; N = $109,635 and $391.55;
O = $177,740 and $317.39]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
DQ: 6
AP Manufacturing Company has a single production process. Three products P, Q and Rare produced by workers the wage rate per hour is $4. The budget information has been obtained for the year is as follows:
Product |
Production units |
Material |
Materials cost |
Labour hours |
Machine hours |
Batches |
|
|
Per unit |
Per unit |
Per unit |
Per unit |
|
P |
2,000 |
2 units |
$3 |
0.50 hour |
1.00 hour |
6 |
Q |
1,000 |
3 units |
$5 |
0.25 hour |
0.25 hour |
5 |
R |
500 |
4 units |
$2 |
1.00 hour |
1.50 hour |
4 |
The overhead cost and related cost drives are:
Overhead |
Cost Drives |
Amount (in $) |
Material receipt and inspections |
No of batches |
30,000 |
Material handing |
Quantity of materials |
18,000 |
Short term variable cost |
No of machine hours |
6,000 |
Required: Using activity based costing find out:
(1) Cost driver rate; (2) Total cost for each product; (3) Cost per unit
Answers: (1) CDR = $2,000; $2; $2;
(2) Total cost = $34,000; $22,500; $16,500;
(3) $17; $22.50; $33]
Materials per unit is applied for Quantity not for direct materials
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
DQ: 7
ABC Company manufactures two products namely X and Y. Data for the period is as follows:
|
Product X |
Product Y |
|
Output in units |
2,000 |
3,000 |
|
Machine hour unit |
2 hours |
1 hour |
|
Labour hour per unit |
2 hours |
3 hours |
|
Production run |
7 |
3 |
|
Total production overhead recorded and cost-driver fixed by cost accounting department is analyzed as:
Cost |
Cost Drives |
Amount ($) |
|
Set up cost |
Production runs |
20,000 |
|
Machine department |
Machine hours |
14,000 |
|
Scheduling cost |
Production runs |
18,000 |
|
Required: (a) Total overhead and overhead rate by using labour hour rate; (b) Cost driver rate
(c) Total overhead and overhead rate under activity based costing
Answer: (1) Total overhead: X = $16,000; Y = $36,000;
ORPU: X = $8.00, Y= $12.00;
(2) Total overhead: X = $34,600; Y = $17,400;
ORPU: X = $17.30, Y = $5.80;
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
DQ: 8
A Company produces two types of products. The president of the company recently decided to change from a volume based costing system to an activity based cost system. To assess the effect of the change, the following data have been gathered:
Products |
Units |
Machine hours |
Production runs |
Prime cost |
Material component |
A B |
3,000 2,000 |
9,000 4,000 |
10 5 |
10,000 8,000 |
6,000 8,000 |
Total |
5,000 |
13,000 |
15 |
18,000 |
14,000 |
The overhead cost and cost drives are as follows:
Cost |
Cost drives |
Amount ($) |
Machine related activities |
Machine hours |
39,000 |
Set up cost |
Production runs |
30,000 |
Material handling costs |
No. of material components |
28,000 |
Required: (1) Cost drives rate for each item by using activity- based costing
(2) Total cost and cost per unit of each product by using cost- driver rate
[Answer: (1) Cost driver rate = $3, $2,000, $2;
(2) Total cost: A = $69,000; B = $46,000;
OPU: A = $23; B = $23;
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
AQ: 1
A Manufacturing Company manufactures three products namely A, B and C. The details regarding product and cost are summarized in the following table:
Product |
Output |
Direct labour |
Machine |
Materials cost |
Production run |
|
in units |
hour/unit |
hour/unit |
per unit |
per unit |
A |
2,000 |
2.5 |
2.0 |
$10 |
10 |
B |
5,000 |
4.0 |
2.0 |
$12 |
15 |
C |
10,000 |
5.0 |
2.0 |
$15 |
20 |
Further information:
Direct labour cost per hour is $4
Overhead cost: |
|
|
Cost driver tools |
||
Repairs and maintenance |
$102,000 |
|
|
Indirect labour |
DLH |
Setup cost |
$90,000 |
|
|
Scheduling cost |
Production run |
Scheduling costs |
$45,000 |
|
|
Set up |
Production run |
Indirect labour |
$138,000 |
|
|
Maintenance |
Machine hour |
Total |
$375,000 |
|
|
|
|
Required: (a) Total cost and cost per unit under traditional costing system by using DLH
(b) Total cost and cost absorption statement under ABC system
[Answers: (a) Total cost: A = $65,000; B = $240,000; C = $600,000;
CPU: A = 32.50; B = 48; C = 60;
(b) Total cost: A = $91,200; B = $251,800; C = $562,000;
CPU: A = 45.60; B =50.36; C = 56.20]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
AQ: 2
A company manufacturing’s three products namely X, Y and Z using the same plant and process. The following information relates to a production period.
Product |
Output in units |
Material cost per unit |
Direct labour cost per unit |
Machine hour per unit |
X |
100 |
$100 |
$6 |
2.0 hours |
Y |
200 |
$50 |
$3 |
1.0 hour |
Z |
500 |
$40 |
$5 |
1.2 hours |
The production overhead and cost drives are:
Overhead |
Cost drives |
Amount |
Set up costs |
No. of production runs |
64,000 |
Stores receiving |
Requisition raised |
8,000 |
Inspection and control |
No. of production runs |
16,000 |
Material handling and dispatch |
Orders executed |
16,000 |
Additional information:
a. The three products were produced in a production run of 25 units each.
b. The requisition raised for the period in the stores for product X, Year and Z were 10, 10 and 20 respectively.
c. The number of order being in a batch of 20 units for each product and number of total order executed was 40
Required: Statement total cost and cost per unit for each product by using
(1) Conventional absorption costing on the basis of machine hours
(2) An activity based costing using suitable cost drives
[Answer: (1) Total cost: $31,400; $31,400; $84,900;
CPU $314; $157; $169.80;
(2) Total cost $24,600; $36,600; $86,500;
CPU $246; $183; $173;
Production runs = Output ÷25 units each batch;
Order executed = Output ÷ 20 units each batch]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
AQ: 3
ABC Manufacturing Company has following information:
Particulars ↓ Products ® |
A |
B |
C |
Output in kg |
500 units |
1,000 units |
2,000 units |
Raw materials usage per unit |
3 units |
2 units |
1 unit |
Raw materials cost per unit |
$20 |
$16 |
$40 |
Labour hour per unit |
1 hour |
2 hours |
0.5 hour |
Machine hours per unit |
0.5 hour |
1 hour |
0.5 hour |
No. of batches |
3 |
5 |
7 |
Production runs |
5 |
10 |
20 |
Skilled labour rate per hour $40
Cost and cost drivers
Overhead |
Amount |
Cost drivers |
Materials receipt |
15,000 |
No. batches |
Materials handling |
8,250 |
Quantity of materials |
Machine expenses |
29,250 |
Machine hours |
Indirect labour |
10,500 |
Direct labour hours |
Set up cost |
7,000 |
Production runs |
|
70,000 |
|
Required: (a) Total cost and cost per unit based on labour and volume
(b) Cost driver rate; (c) Total cost and cost per unit based on ABC
[Answer: (a) Total cost: A = $60,000; B = $152,000; C = $140,000;
CPU: A = $120; B = $152; C = $70;
(b) CDR: $1,000; $1.50; $13; $3; $200;
(c) Total cost: A = $61,000; B = $141,000; C = $150,000;
CPU: A = $122; B = $141; C = $75]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
AQ: 4
ABC Publication (P) Ltd published different kind of books. Following data is related to three books:
Subjects |
Copies (Output) |
Paper per unit |
Printing per unit |
Binding and cutting |
|
|
|
|
(machine hour per unit) |
Economics |
2,000 |
50 |
20 |
0.25 |
English |
3,000 |
40 |
10 |
0.20 |
Nepali |
5,000 |
30 |
5 |
0.15 |
Cost and cost drivers
Overhead |
Amount |
Cost drivers |
Set up cost |
20,000 |
Production runs |
Store receiving |
10,000 |
Requisition raised |
Inspection and control |
15,000 |
Production runs |
Handling and dispatch |
20,500 |
Order executed |
Advance information:
Direct expenses 100% of printing (labour)
Production runs in 500 units each subject
Requisition raised Economics, English and Nepali in 200 units, 150 units and 100 units respectively
Materials dispatched in 50 units each subject
Required: (a) Cost statement of absorption costing based on machine hours
(b) Cost driver rate; (c) Cost statement based on ABC
[Answer: (a) Total cost: Eco = $197,700; Eng = $201,240; Nepali = $226,550;
CPU: Eco = $98,85; Eng = $67.08; Nepali = $45.31;
(b) CDR: $1,000; $22.22; $750; $102.50;
(c) Total cost: Eco = $195,544; Eng = $199,983; Nepali = $229,973;
CPU: Eco = $97.77; Eng = $66.66; Nepali = $45.99]
*Paper = direct materials; printing = direct labour]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
AQ: 5
XYZ Manufacturing Company has following information:
Particulars ↓ Products ® |
A |
B |
C |
Output in kg |
1,500 kg |
900 kg |
600 kg |
Raw materials usage per kg |
1.5 units |
3 units |
4.5 unit |
Raw materials cost per kg |
$15 |
$7.5 |
$30 |
Labour hour per kg |
0.60 hour |
0.50 hours |
0.75 hour |
Machine hours per kg |
0.75 hour |
1.5 hour |
1.75 hour |
Production runs |
5 |
3 |
2 |
Other information:
a. Machine overhead rate $28 per hours
b. Skilled labour rate per hour $30
c. Materials procurement in per 300 units of each output
d. No. of inspection in per 100 units of each output
Cost and cost drivers
Overhead |
% of expenses |
Cost drivers |
Schedule cost |
10% |
Production runs |
Materials procurement |
35% |
No. of materials procurement |
Machine expenses |
40% |
Machine hours |
Inspection |
15% |
No. of inspection |
Required: (a) Total overhead; (b) Allocation of overhead;
(c) Cost statement under traditional costing based on machine hours (d) Cost driver rate;
(e) Cost statement under ABC
[Answer: (a) Total expenses $98,700
(b) Expenses allocation: $9,870; $34,545; $39,480; $14,805;
(c) Total cost: A = $92,250; B = $71,550; C = $123,900;
CPU: A = $61.50; B = $79.50; C = $206.50;
(d) CDR: $1,000; $22.22; $750; $102.50;
(e) Total cost: A = $102,961; B = $66,937; C = $118,102;
CPU: A = $68.64; B = $74.04; C = $196.84]
*Calculation is nearest rupees]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
AQ: 6
The traditional cost statement based on machine hours is given by JP Manufacturing Company:
Cost Statement under Traditional Costing
Particulars |
Products |
||
|
A = 5,000 |
B = 6,000 |
C = 7,000 |
Direct materials [Output x RMPU] |
75,000 |
120,000 |
175,000 |
Direct labour [@ $20] |
100,000 |
120,000 |
140,000 |
Prime cost |
175,000 |
240,000 |
315,000 |
Add: Overhead (based on machine hour): |
|
|
|
Machine expenses (MH x $15) |
37,500 |
67,500 |
105,000 |
Total cost |
212500 |
307500 |
420000 |
Output |
5,000 |
6,000 |
7,000 |
Cost per units = Total cost ÷ Output |
42.50 |
51.25 |
60.00 |
The company sales whole products at 50% profit on cost. The company wants to change traditional based costing to activity based costing. Other data is given below:
Particulars |
A |
B |
C |
No. of order |
10 |
14 |
16 |
No. of set up |
5 |
7 |
10 |
Area occupied (square feet) |
400 |
1,000 |
1,500 |
Cost and cost drivers are:
Overhead |
Amount |
Cost drivers |
Order process |
50,000 |
No. of order |
Production control |
29,900 |
No. of set up |
Rent and rate |
72,500 |
Area occupied |
Machine expenses |
57,600 |
Machine hours |
Required: (1) Cost driver rate; (2) Cost statement under ABC showing total cost and cost per unit.
(3) Selling price per unit under traditional costing and ABC.
[Answer: (1) CDR = $1,250; $1,359.09; $25; $3.20;
(2) Total cost: A = $220,295; $311,214; $408,491;
CPU: A = $44.06; B = $51.87; C = $58.36
(3) SPPU: TC: A = $63.75; B = $76.88; C = $90.00;
ABC: A = $66.09; B = $77.81; C = $87.54]
* Machine hours = A = 0.50; B = 0.75; C = 1.00;
Labour hours = Direct labour ÷ $20; A = 5,000; B = 6,000; C = 7,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
AQ: 7
High-Light Polymers (P) Ltd manufactures kids school shoes. The following data is related to four kinds of shoes for the month of January:
Particulars ↓ |
Products ® |
A |
B |
C |
D |
Output |
[units] |
120 |
100 |
80 |
120 |
Direct materials |
[$ per unit] |
40 |
50 |
30 |
60 |
Direct labour |
[$ per unit] |
28 |
21 |
14 |
21 |
Machine hours |
[per unit] |
4 |
5 |
2 |
3 |
Selling price per unit |
[$] |
180 |
200 |
100 |
180 |
Other information:
· Production produced (runs) in 20 units per batch and order executed (sold) in 10 units per pack.
· The number of requisition raised in 20 for each product.
· No. of component of materials A, B C and D in 12, 10, 8 and 12 respectively.
Overhead and cost drivers:
Overhead |
Cost drivers |
Amount |
|
Set up cost |
Production runs |
5,040 |
|
Store receiving |
Requisition raised |
3,660 |
|
Inspection and control |
No. of components |
2,100 |
|
Materials handling |
Order executed |
4,200 |
|
Machine expenses |
Machine hours |
15,000 |
|
|
|
30,000 |
|
Required: (Total cost, cost per unit and profit or loss under)
(1) Total cost, cost per unit and profit or loss under traditional costing based machine hours
(2) Total cost, cost per unit and profit or loss under activity based costing.
[Answers: |
A |
B |
C |
D |
|
1 |
Total cost |
17,760 |
17,100 |
6,720 |
16,920 |
CPU |
148 |
171 |
84 |
141 |
|
Profit |
32 |
29 |
16 |
39 |
|
2 |
Total cost |
17,115 |
15,715 |
8,195 |
17,475 |
CPU |
142.63 |
157.15 |
102.44 |
145.63 |
|
Profit |
37.37 |
42.85 |
2.44 |
34.37 |
|
|
|||||
CDR = $240; $45.75; $100; $100; $10 |
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