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Entity Blue makes and sells two products, X and Y. Data for production and sales each month are as follows: Particulars Product X Product Y
Entity Blue makes and sells two products, X and Y. Data for production and sales each month are as follows: Particulars Product X Product Y Sales Demand 4,000 units 8,000 units Direct Material Cost/Unit OMR 20 OMR 10 Direct Labour Hours/Unit 0.1 hour 0.2 hours Direct Labour Cost/Unit OMR 2 OMR 4 Production overheads are OMR 500,000 each month. These are absorbed on a directlabour hour basis. An analysis of overhead costs suggests that there are four main activities that cause overhead expenditure. Activity Total Cost driver Total Product Product Cost Number X Y Batch setup 100,000 No. of set-ups 20 10 10 Order handling 200,000 No. of orders 40 24 16 Machining 120,000 Machine hours 15,000 6,000 9,000 Quality control 80,000 No. of checks 32 18 14 500,000 Required: Calculate the full production costs for Product X and Product Y, using: (a) Traditional Absorption Costing (b) Activity Based Costing
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