Neverland Ltd produces a range of products, including Product Y and Product Z. Each month 5,000 units of each product are produced and the products are manufactured at a rate of 50 units per hour. There are 800 production runs per month, of which includes 50 for Product Y and 200 for Product Z. Product Z needs to be made in smaller batches due to its perishable nature. The budgeted overhead cost per month is $720,000 and it is expected that 40,000 direct labour hours would be required. An investigation into the production process has shown that overhead costs mainly relate to batch-level activities associated with machine set-up and handling materials for production runs. Required: Assume that Neverland Ltd adopts an activity-based costing system, calculate the overhead cost per unit for Product Y and Product Z.
Neverland Ltd produces a range of products, including Product Y and Product Z. Each month 5,000 units of each product are produced and the products are manufactured at a rate of 50 units per hour. There are 800 production runs per month, of which includes 50 for Product Y and 200 for Product Z. Product Z needs to be made in smaller batches due to its perishable nature.
The budgeted overhead cost per month is $720,000 and it is expected that 40,000 direct labour hours would be required. An investigation into the production process has shown that overhead costs mainly relate to batch-level activities associated with machine set-up and handling materials for production runs.
Required: Assume that Neverland Ltd adopts an activity-based costing system, calculate the overhead cost per unit for Product Y and Product Z.
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