Reference no: EM132997896

Question - A company manufactures two products, Land M, using the same equipment and similar processes. An extract of the production data for these products in one period is shown below.

L M

Quality produced (units) 5,000 7,000

Direct labour hours per unit 1 2

Machine hours per units 3 1

Set-up in the period 10 40

Orders handled in the period 15 60

Overhead costs Relating to machine activity 220,000 Relating to production run set-ups 20,000

Relating to handling of orders 45,000 285,000

Required - A. Calculate the production overheads to be absorbed per unit of each product based on an ABC approach using suitable cost drivers.

B. Outline the four stages of the ABC process.

C. State Two advantages and two disadvantages of the ABC System.