Question
Cost Accounting Ltd manufactures three products. The company allocates overhead costs as a rate per total direct labour hour. The following cost driver values have
Cost Accounting Ltd manufactures three products. The company allocates overhead costs as a rate per total direct labour hour.
The following cost driver values have been identified:
Machine hours / unit Production units Percentage of expert work Number of orders packed Labour hours
Alpha
0.70 5 000 30% 4 1 200
Beta
0.30 3 500 20% 8 800
Gamma
0.50 8 000 50% 23 1 500
An analysis of the manufacturing overhead cost for the period shows the following:
Activities
Machine costs Expert consultation Packing Total
Overhead cost
265 000 98 500 15 000
378 500
Required | Marks | |
7.1 | Calculate the overhead rate that they are currently applying to the products. | 1.5 |
7.2 | Allocate the manufacturing overhead costs using principles of activity based costing. | 12 |
7.3 | Why is activity based costing considered for manufacturing overhead cost allocation? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started