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(i) Select a suitable cost driver for each item of overhead expenses and calculate the cost per unit of cost driver. (ii) Using the concept of Activity Based Costing, compute the factory cost per unit of each product.

(i) Select a suitable cost driver for each item of overhead expenses and calculate the cost per unit of cost driver. (ii) Using the concept of Activity Based Costing, compute the factory cost per unit of each product.

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter4: Job Order Costing
Section: Chapter Questions
Problem 11EB: A company has the following information relating to its production costs: Compute the actual and...
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(i) Select a suitable cost driver for each item of overhead expenses and calculate the
cost per unit of cost driver.
(ii) Using the concept of Activity Based Costing, compute the factory cost per unit of
each product.

Question 1 A company produces four products, viz. P, Q, R and S. The data relating to production activity are as under: Quantity of production Direct labour Machine hours/ Direct Labour unit Material cost/ Product unit RM hours/unit cost/unit RM 1,000 10 0.50 6 Q 0.50 10,000 1,200 14,000 10 1 R 32 4 2.00 24 S 34 3 3.00 18 Production overheads are as under: RM (1) Overheads applicable to machine oriented activity: (i) Overheads relating to ordering materials (ii) Set up costs 1,49,700 7,680 17,400 (iv) Administration overheads for spare parts 34,380 (v) Material handling costs 30,294 The following further information have been compiled: No. of materials No. of times Product No. of set up No. of spare parts orders 3 materials handled 3 6 6 Q 18 12 30 15 R 5 3 24 12 36 12
Transcribed Image Text:Question 1 A company produces four products, viz. P, Q, R and S. The data relating to production activity are as under: Quantity of production Direct labour Machine hours/ Direct Labour unit Material cost/ Product unit RM hours/unit cost/unit RM 1,000 10 0.50 6 Q 0.50 10,000 1,200 14,000 10 1 R 32 4 2.00 24 S 34 3 3.00 18 Production overheads are as under: RM (1) Overheads applicable to machine oriented activity: (i) Overheads relating to ordering materials (ii) Set up costs 1,49,700 7,680 17,400 (iv) Administration overheads for spare parts 34,380 (v) Material handling costs 30,294 The following further information have been compiled: No. of materials No. of times Product No. of set up No. of spare parts orders 3 materials handled 3 6 6 Q 18 12 30 15 R 5 3 24 12 36 12
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