The information and data in Tables 4, 5, and 6 will be used to determine cost drivers and calculate overheads. Table 4 Product Information X Y Z High volume Medium volume Low volume Large batches Medium batches Low batches Few purchase Orders placed Medium purchase Orders placed Many purchase Orders placed Few customer Orders placed Medium customer Orders placed Many customer Orders placed Table 5 Product Information x Y Z Total Typical batch size 2000 600 325 No. of production runs 25 50 50 125 No. of inspections 25 50 50 125 Purchase orders placed 25 100 200 325 Customer orders received 10 100 200 310 Table 6 Analysis of indirect labour K000 K 000l Machining: Supervision 100 Set-up 400 Quality control 1 400 900 Assembly: Supervision 200 Quality control 1 400 600 Purchasing/order processing: Resource procurement 300 Customer liaison/expediting 300 600 Factory management: General administration 2, 100 2,200 Requirement Prepare an ABC analysis and calculate product costs. Discuss the strengths and weaknesses associated with the implementation of the ABC Technique, providing relevant examples from part (a) above.
The information and data in Tables 4, 5, and 6 will be used to determine cost drivers and calculate overheads.
Table 4
Product Information
|
X |
Y |
Z |
|
High volume |
Medium volume |
Low volume |
|
Large batches |
Medium batches |
Low batches |
|
Few purchase Orders placed |
Medium purchase Orders placed |
Many purchase Orders placed |
|
Few customer Orders placed |
Medium customer Orders placed |
Many customer Orders placed |
Table 5
Product Information
|
|
x |
Y |
Z |
Total |
|
Typical batch size |
2000 |
600 |
325 |
|
|
No. of production runs |
25 |
50 |
50 |
125 |
|
No. of inspections |
25 |
50 |
50 |
125 |
|
Purchase orders placed |
25 |
100 |
200 |
325 |
|
Customer orders received |
10 |
100 |
200 |
310 |
Table 6
Analysis of indirect labour
K000 K 000l
Machining:
Supervision 100
Set-up 400
Quality control 1 400
900
Assembly:
Supervision 200
Quality control 1 400
600
Purchasing/order processing:
Resource procurement 300
Customer liaison/expediting 300
600
Factory management:
General administration 2, 100
2,200
Requirement
- Prepare an ABC analysis and calculate product costs.
- Discuss the strengths and weaknesses associated with the implementation of the ABC Technique, providing relevant examples from part (a) above.
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