A.A company makes 2 products, Product X and Product Y. Each product is processed through two cost centres, CC1 and CC2. The following budgeted data is available:

CC1CC2

Allocated and apportioned overheads126,000180,000

(All overheads are fixed costs)

Direct labour hours per unit

Product X1.52.0

Product Y1.22.6

The budgeted production is 12,000 units of Product X and 10,000 units of Product Y. Fixed overheads are absorbed into costs on a direct labour hour basis.

Required

Calculate the budgeted total fixed overhead cost per unit for Product X and for Product Y using Absorption Costing Principles.(12 Marks)

B.Explain two out of the following three terms:

1. Absorption costing
2. Standard costing
3. Marginal costing(8 Marks)

C.A company manufactures a component which is included in a final product which it also manufactures. Management have identified an external supplier who would be willing to supply the component.

The variable cost of manufacturing the component internally is 5.

The external supplier would be prepared to supply the components for 6.50 each. It has been estimated that cash savings on general overhead expenditure will be 24,000 each year if internal production is ended.

The company needs 10,000 units of the component each year.

Should the company make or buy the component?(5 Marks)