Campoo plc makes and sells a range of products. Management has carried out an analysis of the total cost of production. The information in Appendix 1 (below) reflects this analysis of budgeted costs for the six-month period to 30 June. The analysis has identified that the factory is organized in order to permit the operation of three production lines X, Y and Z. Each production line facilitates the production of two or more products. Production line X is only used for the production of products A and B. The products are manufactured in batches on a just-in-time basis in order to fulfil orders from customers. Only one product can be manufactured on the production line at any one time. Materials are purchased and received on a just-in-time basis. Additional information is available for production line X as follows: 3 (i) Production line machine costs including labour, power, etc., vary in proportion to machine hours. (ii) Costs incurred for production scheduling, WIP movement, purchasing and receipt of materials are assumed to be incurred in proportion to the number of batches of product which are manufactured. Machine set-up costs vary in proportion to the number of set-ups required and are linked to a batch throughput system. (iii) Costs for material scheduling systems and design/testing routines are assumed to be incurred by each product in proportion to the total quantity of components purchased and the total number of types of component used, respectively. The number of different components designed/tested for products A and B are 16 and 4, respectively. (iv) Product line development cost is identified with changes in product design and production method. At present such costs for production line X are apportioned 70 per cent: 30 per cent to products A and B, respectively. Production line maintenance costs are assumed to vary in proportion to the maintenance hours required for each product. (v) General factory costs are apportioned to each of production lines X, Y and Z in the ratio 20 per cent: 65 per cent: 15 per cent, respectively. Such costs are absorbed by product units at an average rate per unit through each production line. Required: Prepare an activity based budget for production line X for the six-month period to 30 June analysed into sub-sets for activities that are product unit based, batch based, product sustaining, production line sustaining and factory sustaining. The budget should show: (i) Total cost for each activity sub-set grouped to reflect the differing operational levels at which each sub-set is incurred/controlled. (ii) Average cost per unit for each of products A and B analysed by activity sub-set.

Appendix 1 Campoo plc Budget data six months to 30 June Product A Product B Material cost per product unit 80 50 4 Production line X machine hours per unit 0.6 0.4 Production batch size (units) 120 320 Total production (units) 12000 16000 Components per product unit (quantity) 20 15 Number of customers 6 12 Number of production line set-ups 10 18 Production line X maintenance hours 400 200 Cost category Production line X Factory total Labour, power, etc. 340,000 Set-up of machines 42,000 Production scheduling 26,400 WIP movement 31,300 Purchasing and receipt of material 56,300 Material scheduling system 15,000 Design/testing routine 20,000 Production line development 45,000 Production line maintenance 18,000 General factory administration 600,000 General factory occupancy 240,000