Activity Based Costing | Brief Questions | Descriptive Questions | Analytical Questions

 

 

 

Activity Based Costing | Brief Questions | Descriptive Questions | Analytical Questions | Problems and Answers

 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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Brief Questions

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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Descriptive Questions

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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;

 

 

Analytical Questions

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. 

 

 

 

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