Company AA has 6 standard products from stainless steel and brass. The company’s most popular product is Product XX The following are Product XX's data for next year budget: ActivityCost DriverCost Driver Volume/yearCost Pool (RM)Purchasing Purchase Orders1,50075,000SettingBatches Produced2,800112,000Material Handling Material Movements8,00096,000InspectionBatches Produced2,80070,000Machining CostMachine Hours50,000150,000 Purchase Orders25Output15,000 unitsProduction Batch Size100 unitsMaterial movement per batch6Machine hour per unit0.1 Calculate:a) Calculate the budgeted overhead costs using activity-based costing principlesb) Calculate the budgeted overhead costs using absorption costing (absorb overhead using machine hours)

Activity Based Costing: Under Activity Based Costing Method, overhead costs are allocated over…

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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

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Company AA has 6 standard products from stainless steel and brass. The company’s most popular product is Product XX

The following are Product XX's data for next year budget:

Activity	Cost Driver	Cost Driver Volume/year	Cost Pool (RM)
Purchasing	Purchase Orders	1,500	75,000
Setting	Batches Produced	2,800	112,000
Material Handling	Material Movements	8,000	96,000
Inspection	Batches Produced	2,800	70,000
Machining Cost	Machine Hours	50,000	150,000

Purchase Orders	25
Output	15,000 units
Production Batch Size	100 units
Material movement per batch	6
Machine hour per unit	0.1

Calculate:

a) Calculate the budgeted overhead costs using activity-based costing principles

b) Calculate the budgeted overhead costs using absorption costing (absorb overhead using machine hours)

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