Al Majdi and provides the following information for the month of them. They manufacturing the product shirt,reen and wait Product Output in units 100 Total Direct material con il SO 250 700 3000 Direct labour cos Rial 1000 10000 1000 Machine hours (per unit) 1500 2500 1 Labour hours per 4 M 1 Factory overheads Maintenance expenses 1000 Material handling expenses Quality control expenses 2500 Packing and dispatch expenses 1000 2000 The company is currently absorbing the production overheads on the basis of machine houe in der to find out the cost per unit. The market-selling price is pre determined for each product. The owner of the company is not confident with the method of absorption that is being followed, as the profiter is not satisfactory You have been approached in onder to frame out an curse method of absorption that will help them in maintaining a good profit margin As a part of your work you have investigated the following details from the records that can be used for calculation of cost. The products are produced in butches of: Shirts: 100 units. Trouer: 100 units and Suits 50 units The products are sold in batches of: Shirts: 40 units, Trousers 30 units and Suite 20 units Shirts: 10 The number of requisitions raised for raw material requirement on the stores: requisitions, Trousers: 10 requisitions and Suits: 10 requisitions The products are tested for quality control in batches of: Shinta: 20 units, Trousers: 40 units and Suits: 50 units . You have also ascertained the cost drivers to be used: Cost Cost driver Factory overheads Machine hours Maintenance expenses Production runs Material handling expenses Requisitions raised Quality control expenses Quality check run Packing and dispatch expenses Orders executed Required: 1. To calculate the total costs for each product, using conventional costing system assuming that the overhead costs are absorbed on machine hour basis. II. To calculate the total costs for each product, using conventional costing system assuming that the overhead costs are absorbed on labour hour basis. III. To calculate the total costs for each product, using activity-based costing. IV. To calculate and list the unit product costs from the above figures to show the differences and to comment briefly on any conclusions, which may be drawn which could have pricing and profit implications. Al Majdi and provides the following information for the month of them. They manufacturing the product shirt,reen and wait Product Output in units 100 Total Direct material con il SO 250 700 3000 Direct labour cos Rial 1000 10000 1000 Machine hours (per unit) 1500 2500 1 Labour hours per 4 M 1 Factory overheads Maintenance expenses 1000 Material handling expenses Quality control expenses 2500 Packing and dispatch expenses 1000 2000 The company is currently absorbing the production overheads on the basis of machine houe in der to find out the cost per unit. The market-selling price is pre determined for each product. The owner of the company is not confident with the method of absorption that is being followed, as the profiter is not satisfactory You have been approached in onder to frame out an curse method of absorption that will help them in maintaining a good profit margin As a part of your work you have investigated the following details from the records that can be used for calculation of cost. The products are produced in butches of: Shirts: 100 units. Trouer: 100 units and Suits 50 units The products are sold in batches of: Shirts: 40 units, Trousers 30 units and Suite 20 units Shirts: 10 The number of requisitions raised for raw material requirement on the stores: requisitions, Trousers: 10 requisitions and Suits: 10 requisitions The products are tested for quality control in batches of: Shinta: 20 units, Trousers: 40 units and Suits: 50 units . You have also ascertained the cost drivers to be used: Cost Cost driver Factory overheads Machine hours Maintenance expenses Production runs Material handling expenses Requisitions raised Quality control expenses Quality check run Packing and dispatch expenses Orders executed Required: 1. To calculate the total costs for each product, using conventional costing system assuming that the overhead costs are absorbed on machine hour basis. II. To calculate the total costs for each product, using conventional costing system assuming that the overhead costs are absorbed on labour hour basis. III. To calculate the total costs for each product, using activity-based costing. IV. To calculate and list the unit product costs from the above figures to show the differences and to comment briefly on any conclusions, which may be drawn which could have pricing and profit implications
