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Away Ltd make trailers. The selling price is 20% on the full cost. The company uses Traditional Absorption costing to calculate its selling prices. Away
Away Ltd make trailers. The selling price is 20% on the full cost. The company uses Traditional Absorption costing to calculate its selling prices. Away Ltd have investigated their budgeted overheads for the next year as follows:- Cost Pool Cost Driver total number of cost | drivers per cost pool Sales orders 5,000 Sales orders 2002 Machining 16,000 Machine hours 32,000 Machine set ups 7,000 Set ups 3502 Warehousing (storage costs) 12,000 Weeks in warehouse 300 e Quality control 4,000 Quality Inspections 400 Other overheads 20,000 Direct labour hours 5,000 TOTAL 64,000 e Job XZ4 is for a new customer who says that if the price is above 1,900 he will buy from a competitor. Job XZ4 has the following specifications:- Job XZ4 Specifications Direct materials 1,000 Direct labour 20 hours @ 10 per hour Sales orders 12 Machine hours 100 Set ups 52 Weeks in warehouse 62 Inspections 32 5 marks 4a) Using Traditional Absorption Costing, complete the table overleaf to calculate the SELLING PRICE of Job XZ4. Remember to show all workings Page 11 of 14 Order XZ4 Direct materials Direct labour PRIME COST Overhead FULL COSTA Mark up SELLING PRICE A a A new accountant has joined Away Ltd and has suggested the company use ABC (Activity Based Costing). 4b) Calculate the cost per driver 3 marks
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