THE QUESTION You are just from attending a conference on Activity Based Costing (ABC) and...
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THE QUESTION You are just from attending a conference on Activity Based Costing (ABC) and you now wish to put your knowledge to practice by applying the principles of ABC to the four products currently made and sold by your client. Details of the four products and relevant information are given below for one period. 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 analysed as follows: You have ascertained that the 'cost drivers' to be used are as listed below for the overhead costs shown:| 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 of a product. (a) Calculate the cost per unit for each product using absorption costing (4 Marks) (b) Calculate the cost per unit for each product using activity-based costing (8 Marks) (c) Based on the calculated unit product costs, show the differences and comment briefly on any conclusions which may be drawn which could have pricing and profit implications. (8 Marks) (d) Briefly explain five (5) circumstances where the application of ABC is deemed appropriate as opposed to absorption costing. (5 Marks) THE QUESTION You are just from attending a conference on Activity Based Costing (ABC) and you now wish to put your knowledge to practice by applying the principles of ABC to the four products currently made and sold by your client. Details of the four products and relevant information are given below for one period. 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 analysed as follows: You have ascertained that the 'cost drivers' to be used are as listed below for the overhead costs shown:| 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 of a product. (a) Calculate the cost per unit for each product using absorption costing (4 Marks) (b) Calculate the cost per unit for each product using activity-based costing (8 Marks) (c) Based on the calculated unit product costs, show the differences and comment briefly on any conclusions which may be drawn which could have pricing and profit implications. (8 Marks) (d) Briefly explain five (5) circumstances where the application of ABC is deemed appropriate as opposed to absorption costing
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THE QUESTION You are just from attending a conference on Activity Based Costing (ABC) and you now wish to put your knowledge to practice by applying the principles of ABC to the four products currently made and sold by your client. Details of the four products and relevant information are given below for one period. 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 analysed as follows: You have ascertained that the 'cost drivers' to be used are as listed below for the overhead costs shown:| 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 of a product. (a) Calculate the cost per unit for each product using absorption costing (4 Marks) (b) Calculate the cost per unit for each product using activity-based costing (8 Marks) (c) Based on the calculated unit product costs, show the differences and comment briefly on any conclusions which may be drawn which could have pricing and profit implications. (8 Marks) (d) Briefly explain five (5) circumstances where the application of ABC is deemed appropriate as opposed to absorption costing. (5 Marks) THE QUESTION You are just from attending a conference on Activity Based Costing (ABC) and you now wish to put your knowledge to practice by applying the principles of ABC to the four products currently made and sold by your client. Details of the four products and relevant information are given below for one period. 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 analysed as follows: You have ascertained that the 'cost drivers' to be used are as listed below for the overhead costs shown:| 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 of a product. (a) Calculate the cost per unit for each product using absorption costing (4 Marks) (b) Calculate the cost per unit for each product using activity-based costing (8 Marks) (c) Based on the calculated unit product costs, show the differences and comment briefly on any conclusions which may be drawn which could have pricing and profit implications. (8 Marks) (d) Briefly explain five (5) circumstances where the application of ABC is deemed appropriate as opposed to absorption costing 