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INFORMATION Visa Limited manufactures two products and the company is keen on applying the principles of activity-based costing (ABC) Relevant information pertaining to the two products for a given period appear below. Product A Product B 540 5 R240 R105 Output in units Machine hours per unit Direct materials cost per unit Direct labour cost per unit 720 7 R300 R147 The two products are similar and are usually produced in production runs of 20 units and sold in batches of 10. Currently the production overheads are absorbed by using a machine hour rate, and the total of the production overheads for the period are as follows: Machine department costs (rent, rates, depreciation and supervision) Set-up costs Stores receiving Inspection Quality control Materials handling and dispatch The cost drivers (in random order) to be used for the overhead costs are as follows. Orders executed Number of production runs (used twice) Requisitions raised Machine hours R 30 960 15 120 11 160 6300 13 860 The number of requisitions raised on the stores was 120 for each product and the number of orders executed was 126, each order being for a batch of 10 of a product

INFORMATION Visa Limited manufactures two products and the company is keen on applying the principles of activity-based costing (ABC) Relevant information pertaining to the two products for a given period appear below. Product A Product B 540 5 R240 R105 Output in units Machine hours per unit Direct materials cost per unit Direct labour cost per unit 720 7 R300 R147 The two products are similar and are usually produced in production runs of 20 units and sold in batches of 10. Currently the production overheads are absorbed by using a machine hour rate, and the total of the production overheads for the period are as follows: Machine department costs (rent, rates, depreciation and supervision) Set-up costs Stores receiving Inspection Quality control Materials handling and dispatch The cost drivers (in random order) to be used for the overhead costs are as follows. Orders executed Number of production runs (used twice) Requisitions raised Machine hours R 30 960 15 120 11 160 6300 13 860 The number of requisitions raised on the stores was 120 for each product and the number of orders executed was 126, each order being for a batch of 10 of a product

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 3PB: Activity-based department rate product costing and product cost distortions Big Sound Inc....
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Using the information calculate the following,
1. The manufacturing costs per unit and the total manufacturing costs, if all the overhead costs are absorbed on a machine hour basis.
2. The overheads costs per unit using the ABC system

INFORMATION Visa Limited manufactures two products and the company is keen on applying the principles of activity-based costing (ABC). Relevant information pertaining to the two products for a given period appear below Product A Product B Output in units Machine hours per unit Direct materials cost per unit Direct labour cost per unit Machine department costs (rent, rates, depreciation and supervision) Set-up costs Stores receiving The two products are similar and are usually produced in production runs of 20 units and sold in batches of 10. Currently the production overheads are absorbed by using a machine hour rate, and the total of the production overheads for the period are as follows: Inspection/Quality control Materials handling and dispatch 720 7 R300 R147 The cost drivers (in random order) to be used for the overhead costs are as follows. Orders executed Number of production runs (used twice) Requisitions raised Machine hours 540 5 R240 R105 R 30 960 15 120 11 160 6 300 13 860 The number of requisitions raised on the stores was 120 for each product and the number of orders executed was 126, each order being for a batch of 10 of a product
Transcribed Image Text:INFORMATION Visa Limited manufactures two products and the company is keen on applying the principles of activity-based costing (ABC). Relevant information pertaining to the two products for a given period appear below Product A Product B Output in units Machine hours per unit Direct materials cost per unit Direct labour cost per unit Machine department costs (rent, rates, depreciation and supervision) Set-up costs Stores receiving The two products are similar and are usually produced in production runs of 20 units and sold in batches of 10. Currently the production overheads are absorbed by using a machine hour rate, and the total of the production overheads for the period are as follows: Inspection/Quality control Materials handling and dispatch 720 7 R300 R147 The cost drivers (in random order) to be used for the overhead costs are as follows. Orders executed Number of production runs (used twice) Requisitions raised Machine hours 540 5 R240 R105 R 30 960 15 120 11 160 6 300 13 860 The number of requisitions raised on the stores was 120 for each product and the number of orders executed was 126, each order being for a batch of 10 of a product
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