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Himalayan Corporation has been using a cost system that allocates all factory overhead costs to products based on 350% of the direct labour cost. The
Himalayan Corporation has been using a cost system that allocates all factory overhead costs to products based on 350% of the direct labour cost. The company has just decided to use Activity based costing systems that traces indirect costs to products based on the consumption of major activities as shown below: Activity Annual Cost driver Costs (Rs) Product cost driver quantity consumption Labour Rs 3,00,000 30.000 Rs 10,000 Machining 20,000 hours 5,00,000 800 hours Set up 10,000 hours 1,00,000 100 hours Production order 2000 orders 2,00,000 12 orders Material Handling 1000 requisitions 20,000 5 requisitions Parts administrations 12,000 parts 4,80,000 18 parts Calculate the annual cost of the product using Activity Based Costing system
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