AB company produces two products, A and B. The budgeted annual output is 200 units of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
AB company produces two products, A and B. The budgeted annual output is 200 units of A product and 400 units of B product. The budgeted manufacturing costs for each product are as follows: Direct material cost/unit Direct labour cost/unit The budgeted production overheads Allocation base Activities Ordering of materials Material preparation Supervision Quality control Total A 1kg@£10 1.5 hours@£12 An analysis of the production process revealed that the overheads will be caused by four activities: ordering of materials (driven by order processing hours), material preparation (driven by material handling hours), supervision (driven by supervision hours), and quality control (driven by No. of checks). The following table shows the consumption of the four activities by products A and B: Cost Pool £1,050 £1,500 £1,950 £1,500 £6,000 B 1.5kg@£4 .5 hours@£12 £6,000 Total direct labour hours A 62.5 hours 60 hours 45 hours 320 checks B 137.5 hours 90 hours 45 hours 80 checks Total 200 hours 150 hours 90 hours 400 checks Requirements for question 2: 1- Calculate the full Absorption cost and the full Activity Based Cost for both A and B products. 2- Compare and contrast your findings in part (a). Explain what you understand by the term 'cross-subsidisation, and how it can impact AB company's financial performance. 3- ABC produces more accurate costing information but is not preferred by many businesses. Suggest reasons why this might be the case. AB company produces two products, A and B. The budgeted annual output is 200 units of A product and 400 units of B product. The budgeted manufacturing costs for each product are as follows: Direct material cost/unit Direct labour cost/unit The budgeted production overheads Allocation base Activities Ordering of materials Material preparation Supervision Quality control Total A 1kg@£10 1.5 hours@£12 An analysis of the production process revealed that the overheads will be caused by four activities: ordering of materials (driven by order processing hours), material preparation (driven by material handling hours), supervision (driven by supervision hours), and quality control (driven by No. of checks). The following table shows the consumption of the four activities by products A and B: Cost Pool £1,050 £1,500 £1,950 £1,500 £6,000 B 1.5kg@£4 .5 hours@£12 £6,000 Total direct labour hours A 62.5 hours 60 hours 45 hours 320 checks B 137.5 hours 90 hours 45 hours 80 checks Total 200 hours 150 hours 90 hours 400 checks Requirements for question 2: 1- Calculate the full Absorption cost and the full Activity Based Cost for both A and B products. 2- Compare and contrast your findings in part (a). Explain what you understand by the term 'cross-subsidisation, and how it can impact AB company's financial performance. 3- ABC produces more accurate costing information but is not preferred by many businesses. Suggest reasons why this might be the case.
Expert Answer:
Answer rating: 100% (QA)
1 Units Cost per unit Direct material Direct labour Total ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Duo plc produces two products, A and B. Each has two components specified as sequentially numbered parts, i.e. product A (parts 1 and 2) and product B (parts 3 and 4). Two production departments...
-
Chromalox Instruments and Controls, located in LaVergne, Tennessee, is a manufacturer of industrial process controllers, monitors, and industrial and military control panels. Chromalox products are...
-
Flosun plc makes and sells a range of products. Management has carried out an analysis of the total cost of production. The information in Appendix 3.1 reflects this analysis of budgeted costs for...
-
Consider the following types of images: i. Real, inverted and highly diminished image. ii. Real, inverted and enlarged image. iii. Virtual, erect and enlarged image. iv. Virtual, erect and diminished...
-
Grainger Company completed its first year of operations on December 31, 2010. Its initial income statement showed that Grainger had revenues of $192,000 and operating expenses of $83,000. Accounts...
-
Using the data in Problem 16.29, write the linearized observation equation for the distance from Steve to Frank?
-
(EAIR annuity) You have two options of paying for your new dishwasher: You can either make a single payment of $400 today, or you can pay $70 for each of the next 6 months, with the first payment...
-
Troy Batkin, the chief executive officer of Batkin Corporation, has assembled his top advisers to evaluate an investment opportunity. The advisers expect the company to pay $400,000 cash at the...
-
10. With the help of the properties of summation and the summation formulas, nd the limit: $393328] Use the limit as n > :0 of the Right Endpoint Rule to nd the area under the graph of f[x] : 6x 3:2...
-
Consolidation related simulation example: Millennium Capital Management, Inc., (MCM) acquired a 90% interest in NextGen, Inc. MCM's Financial Manager, Matthew Steven, has prepared a draft memo to the...
-
Problem The circular plate rotates clockwise with a constant angular velocity of = 1.9 rad/s. (Figure 1) Part A Determine the magnitude of the velocity of the follower rod AB when 0 = /4 rad. Express...
-
If 45 units are sold at the price of $75, and 30 units are sold at the price of $100, what is the price elasticity of demand? Use the mid-point formula, and show all your workings. Williamson...
-
a. Performed $26,800 of services on account. b. Collected $18,400 cash on accounts receivable. c. Paid $4,600 cash in advance for an insurance policy. d. Paid $820 on accounts payable. e. Recorded...
-
Question 1. Classify each characteristic as a qualitative or quantitative:... 1. Classify each characteristic as a qualitative or quantitative: 1.Time 2.Type of car 3.Town of birth 4.Examination...
-
Should hero pay for essential workers during the COVID-19 pandemic be considered a reward or an incentive? Why?
-
Structured query language (SQL) is a database language used to select, update and delete records from a database. All ODBC (open database connected) compliant database support SQL. Why is SQL useful?...
-
Which of the following labor practices is allowed by the nlra
-
Tell whether the angles or sides are corresponding angles, corresponding sides, or neither. AC and JK
-
Fischer Ltd manufactures a range of chess sets, and operates a standard costing system. Information relating to the Spassky design for the month of March is as follows: 1 Standard costs per 100 sets...
-
a) Comment on factors likely to affect the accuracy of the analysis of costs into fixed and variable components. (b) Explain how the analysis of costs into fixed and variable components is of use in...
-
A new private hospital of 100 beds was opened to receive patients on 2 January though many senior staff members including the supervisor of the laundry department had been in situ for some time...
-
Inherent Risk. Microsoft and Netscape were in fierce competition for dominance of the Internet web browser and software market in 1996. Netscape entered the Internet web browser market first and...
-
Materiality. Materiality should be considered by the auditor when (a) determining the nature, timing and extent of audit procedures and (b) evaluating the effect of misstatements. Required A. Define...
-
Audit risk. The following terms are related to audit risk: 1 Audit risk 2 Inherent risk 3 Control risk 4 Detection risk 5 Inherent limitations of an audit Required For each term: A. Provide a...
Study smarter with the SolutionInn App