How to calculate the cost per unit for each product , Cost Accounting

Assignment Help:

Asian Ltd makes three types of gold watch - the Diva (D), the Classic (C) and the Poser (P). A traditional product costing system is used at present; although an activity based costing (ABC) system is being considered. Details of the three products for a typical period are:

Product

Labour hours per unit

Machine hours per unit

Materials cost per unit

Production units

A

0.5

1.5

20

750

C

1.5

1

12

1,250

P

1.0

3

25

7,000

Direct labour costs $6 per hour and production overheads are absorbed on a machine hour basis. The overhead absorption rate for the period is $28 per machine hour.

Required:

(a)    Calculate the cost per unit of each product using the traditional methods, absorbing overheads on the basis of machine hours.

Total production overheads are $654,000 and further analysis shows that the total production overheads can be divided as follows:

Costs relating to set-ups

35%

Costs relating to machinery

20%

Costs relating to materials handling

15%

Costs relating to inspection

30%

Total production overhead

100%

The following total activity volumes are associated with each product line for the period as a whole:

Product

Number of set-ups

Number of movements of materials

Number of inspections

D

75

12

150

C

115

21

180

P

480

87

670

 

670

120

1,000

Required:

(b)   Calculate the cost per unit for each product using ABC principles (work to two decimal places)

(c)  Explain why costs per unit calculated under ABC are often very different to the costs per unit calculated under more traditional methods. Use the information from Asian Ltd to illustrate.


Related Discussions:- How to calculate the cost per unit for each product

Purpose, what are the purposes of cost accounting

what are the purposes of cost accounting

Creating budget and annual operating budget assignment, This assignment wil...

This assignment will consist of developing a center-based financial operating budget. A break-even and Cash-flow projection are not required for this assignment. Students will deve

Realized gain or loss on the exchange, Pauline's Pastry Shop decides to rem...

Pauline's Pastry Shop decides to remodel its offices this year. As part of the remodeling, Pauline's trades furniture with a cost of $12,000 that had been expensed in the year of p

Product costing, scope and limitations of product costing

scope and limitations of product costing

Cash flow statement, Portions of the financial statements for Hawkeye Compa...

Portions of the financial statements for Hawkeye Company are provided below. HAWKEYE COMPANY Income Statement For the Year Ended December 31, 2013 Sales $ 850 Cost of goods sold (3

Classification of labour costs, Classification of Labour Costs This ca...

Classification of Labour Costs This can be classified into like: a) Indirect or Direct cost b) Variable or Fixed cost c) Non controllable and controllable cost a)

.., process costing new practices

process costing new practices

Change in working capital, Current assets 180.00   ...

Current assets 180.00   232.00 Less: Current Liabilities 80.00   105.00 Working Capital

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd