FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Concept explainers

Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing …
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In compari…
Question
Question 2 Wexxon Ple currently makes four products for sale on the local market. Details of the four products and relevant information are given below for one period: Product Output in units Cost per unit: Direct material $40 Direct labour $28 Machine hours (per unit) 4 Axxon 120 Machine Department costs Set up costs Stores receiving costs Inspection/ Quality control Material Handling and Dispatch COST Set up cost Stores receiving Beach 100 Inspection/ Quality Control Material handling and dispatch $50 $21 3 Capal 80 The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production overhead is currently absorbed by using a machine hour rate, and the total of the production overhead for the period has been analyzed as follows: $30 $14 2 S 10,430 5,250 3,600 2,100 4,620 Delta 120 You have ascertained that the cost drivers to be used are as listed below for the overhead costs shown: $60 $21 3 COST DRIVER Number of production runs Requisition raised Number of production runs Orders executed The number of requisitions raised on the stores was 20 for each product and the number of orders executed was 42, each order being for a batch of 10 for the products. Required: (a) Calculate the total cost of each product using the traditional method (overheads are absorbed on a machine hour basis) and Activity Based Costing (ABC).
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Transcribed Image Text:Question 2 Wexxon Ple currently makes four products for sale on the local market. Details of the four products and relevant information are given below for one period: Product Output in units Cost per unit: Direct material $40 Direct labour $28 Machine hours (per unit) 4 Axxon 120 Machine Department costs Set up costs Stores receiving costs Inspection/ Quality control Material Handling and Dispatch COST Set up cost Stores receiving Beach 100 Inspection/ Quality Control Material handling and dispatch $50 $21 3 Capal 80 The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production overhead is currently absorbed by using a machine hour rate, and the total of the production overhead for the period has been analyzed as follows: $30 $14 2 S 10,430 5,250 3,600 2,100 4,620 Delta 120 You have ascertained that the cost drivers to be used are as listed below for the overhead costs shown: $60 $21 3 COST DRIVER Number of production runs Requisition raised Number of production runs Orders executed The number of requisitions raised on the stores was 20 for each product and the number of orders executed was 42, each order being for a batch of 10 for the products. Required: (a) Calculate the total cost of each product using the traditional method (overheads are absorbed on a machine hour basis) and Activity Based Costing (ABC).
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