Fnsacc613 task 1

question no 7

6:52 a moodle.cibt.edu.au Question 7 DWD Manufacturing manufactures two products, A and B. Data relating to the two products follow: Product A Product B Direct Material Direct Labour $82.00 $60.00 2.0 hours @ $20/hour 1.0 hours @ $20/hour $40.00 $20.00 Normal Capacity Production: Product A 5,000 units @ 2.0 DLH per unit = 10,000 DLH Product B 30,000 units @ 1.0 DLH per unit = 30,000 DLH Total DLH @ Normal Capacity 40,000 DLH The company has always used direct labour hours as the base for applying factory overhead costs to products. Expected factory overhead at normal capacity is $2,000,000 per year. Product A is more complex to manufacture than product B and it requires special computer controlled processing machinery for its manufacture. Because of this special processing, the company is considering adopting activity-based costing to achieve more accurate product costing. FNSACC613 Assessment Task 01 v2.2 Page 4 of 5 Crown Institute of Business and Technology Pty Ltd ABN 86 116 018 412 National Provider No: 91371 CRICOS Provider Code: 02870D North Sydney Campus: 116 Pacific Highway North Sydney NSW 2060 P 02 9955 0488 F 02 9955 3888 Sydney CBD Campus: Level 5, 303 Pitt St Sydney NSW 2000 P 02 8959 6340 F 02 9955 3888 Sydney CBD Campus: Level 11, 307 Pitt St Sydney NSW 2000 P 02 8034 6431 Canberra Campus: Suite 1, Level 4, 40 Cameron Avenue, Belconnen, ACT 2617 P 02 6253 5184 The company has identified 4 separate activities as follows: Expected Number of Events or Transactions Activity Centre & (Cost Driver) Traceable Total Product A Product B Costs 1. Machine Setups (Number of setups) $390,000 300 100 200 2. Purchasing Costs (Purchase Orders) 150,000 1,000 400 600 3. Computer Processing (CPU 360,000 24,000 24,000 Minutes) 1,100,000 40,000 10,000 30,000 4. General Factory (Labour Hours) 2,000,000 Required: Complete the following using Excel Spreadsheets. (a) If the company continues to use Direct Labour Hours as the base for applying overhead to products, calculate: i. The pre-determined overhead rate per direct labour hour. ii. The cost to produce one unit of each product. (b) Assume the company decides to adopt activity-based costing to apply overhead cost to products, calculate: i. The overhead rate per unit of cost driver for each activity centre. ii. The amount of overhead cost to be applied to each product. ifi. The cost to produce one unit of each product. iv . Recommend if adopting Activity based Costing would be feasible for DWD Manufacturing