Question
Businesses should ensure they price their goods and services reasonably to retain competitive advantage. An accurate method of costing is important as it can assist
Businesses should ensure they price their goods and services reasonably to retain competitive advantage. An accurate method of costing is important as it can assist a business to determine a fair price for their final product.
With the above in mind, the CEO of GoGo Airlines has provided you with the following information:
Total Overheads = 200,000
Total Machine Hours = 100,000
Product: | Vegan Meal: | Non-vegan Meal: |
Units of Production | 300,000
| 450,000 |
Material Cost per meal | 10 | 12 |
Labour Cost per meal | 8 | 10 |
Machine Hours per meal | 1/30 | 1/5 |
% Overheads | |
Set-up Costs | 20 |
Inspections | 60 |
Delivery costs | 20 |
Vegan Meal: | Non-vegan Meal: | Total: | |
Set ups | 100 | 500 | 600 |
Inspections | 500 | 200 | 700 |
No. of Deliveries | 400 | 800 | 1200 |
You are required to calculate the unit costs of the vegan and non-vegan meals using:
- Traditional costing using machine hours as the basis of allocation of costs and
- ABC system
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