CoursHeroTranscribedText: You have recently been appointed as management accountant to Bragg Ltd. The company manufactures three types of printers. The following details relate to the three products for the production month ofJune 2021. Product Laser Dot Matrix Ink Jet Output in units 600 500 600 Total direct material cost24,00025,000 36,000 Total direct labour cost 16,800 10,500 12,600 Machine hours per unit 4 3 3 The company currently absorbs overheads on the basis of machine hours. The total production overheads forthe month were 130,000. The product cost calculated using absorption costing is as follows: Laser Dot Matrix Ink Jet Material 24,000 25,000 36,000 Labour 16,800 10,500 12,600 Overhead 54,744 34,115 41,058 Total cost 95,544 69,715 89,658 Cost per unit 159.24 139.43 149.43 Overhead Absorption Rate: Total production overheads 130,000 = 22.81 per machine hour Total Machine Hours 5300* *total machine hours [600x4)+[500x3}+[600x3l You are considering the introduction of activity based costing and observe that the production overheads are already captured by each cost centre. An analysis of the 130,000 by the percentage attributable to each department is detailed below. You determine the associated cost drivers for each department and their use by each product, which are also included in the table below. Laser Dot Matrix Ink Jet Minutes Minutes Minutes Machine A 145 140 100 Machine B 95 40 80 Total minutes 240 180 180 You have been advised that each product passes through two machines. The time taken on each machine is detailed below: Cost type Percentage of TotalCost Driver Overhead Cost (as) Machine A 32 Machine time Machine B 44 Machine time Set up 10 Number of set ups Quality |nspectionl4 Number of inspections Total 100 1 (continued) Activity level for each product Laser Dot Matrixlnk JetTotal Number of set ups 4,8004,200 1.900 10,900 Number of inspectionsl,100 1,650 650 3.400 Required: Note: all caicufations can be shown to 2 o'ecr'mar'piaces a] Calculate the cost per unit of each product using Activity-Based Costing. [10 marks] b) In addition given that Bragg Ltd aim to achieve a 15% sales margin, calculate the selling prices per unit using both the traditional and ABC costing systems and comment on the results. (3 marks} c} The company has an opportunity to lease a machine [machine Z) that would serve the same purpose as Machine A. Machine A was originally purchased for 1,000,000 five and a half years ago. At the time of purchase the assumption was that the machine had an estimated useful life of six years with nil residual value and would be depreciated using the straight line method. Depreciation is charged monthly. The machine could be sold for 100,000. The lease costs of the new machine would be 20,000 per month. Recalculate the cost per unit of each product assuming that the company decides to lease machine Z. Assume the number of units sold, the selling price per unit calculated using ABC and the time taken on each machine remain the same. [4 marks} d} Analyse the impact to Bragg Ltd of leasing machine 2
