a) Calculating the full (absorbed) cost of a product requires several steps. List, with an explanation, the correct sequence that the following activities should be completed in order to correctly calculate the full cost of a product:

Calculate the overhead absorption rate

Apportion the fixed costs across cost centers

Select and justify a reasonable method of apportionment

Re-apportion costs from service centers such as administration or the canteen

Apply the overheads to products via the absorption rate

b) ABC Limited started producing and selling its first and only product, The Alpha on 1 January 20X2. It has the following information: Sales in January were 900,000 units, and these doubled in every subsequent month Production was planned to be 2,100,000 units every month, and the plan was achieved in full Each Alpha has 12 of raw materials, 4 of power and 6 of other variable costs Each Alpha sells for 30 There were fixed production costs of 4,200,000 each month, and other fixed costs which were non-production and not to be absorbed into products of 2,000,000 Calculate the profit of the company month by month and in total for the quarter using absorption costing and then marginal costing. Explain the difference in profit for each month.

Answer rating: 100% (QA)

a Correct Sequence of Activities to Calculate the Full Cost of a Product 1 Select and justify a reasonable method of apportionment Before apportioning ... View the full answer