Reference no: EM13721105
Shows the cost drivers, the quantity and unit cost of the cost driver, and total activity cost.
For two products A and B it is found that:
- The direct labour hours for products A and B are the same.
- It takes approximately four times as many machining hours in both cost centres to produce product B as product A.
- Product A requires one quarter of the materials purchased for B.
- Product A requires one third of the total Delivery notes/invoices.
- Product A has issued one third of the total materials issued per production run.
- Product A has issued one half of the planning per production run of that required by Product B.
- Product B requires twice as many machine set-ups as product A.
- The products have the same number of quality control inspections.
If the company produces 50 000 each of products A and B:
(i) Determine the cost driver unit costings in column 5 for the activities of column 1. Show also the product quantity splits in column 4 of each activity for product A and B (e.g. quantity of cost driver Activity Centre 1 is shown as split 100 000 product A and 400 000 product B).
(ii) Determine the overhead activity cost allocations to products A and B (using the activity proportions calculated in column 4) by completing TABLE 3.
(iii) Determine the total overhead allocations to products A and B.
(iv) Find the per unit product overhead cost allocations for each product.
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