How many hours of inspection are expected for coming year

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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

200

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?

Reference no: EM133088076

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