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Question - Seashells Company produces two types of products: Product A and Product B. Drivers for the four activities are as follows.
Product A
Product B
Inspection hours
200
100
Setup hours
30
70
Machine hours
140
300
Number of moves
500
The following activity data have been collected:
Inspecting products £7,500
Setting up equipment £6,000
Machining £4,840
Moving materials £2,100
Required -
1. Calculate the activity rates that would be used to assign costs to each product.
2. Suppose that the activity rate for inspecting products is £25 per inspection hour. How many hours of inspection are expected for the coming year?
3. Why might increasing the number of cost centres (pools) result in the reporting of more accurate product costs?
4. What factors might enable a simplistic product costing system to report reasonably accurate product costs?
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