Housing Ltd manufactures a range of products used in the building industry Manufacturing is undertaken using one of two processes: the A Process and the B Process. All of the products are manufactured in batches. The current pricing policy has been to absorb all overheads using direct labour hours to obtain total cost. Price is then calculated as total cost plus a 35 per cent markup A recent detailed analysis has examined overhead cost the results are Analysis of overhead costs Cost per month (1) Monthly volume ( A Process cost 96,000 480 hours B Process cost 44,300 1,290 hours Set-up cost 42.900 260 set-ups Handling charges 45.600 380 movements Other overheads 50,700 Total overhead costs 280,000 There are 4,000 direct labour hours available each month Two of Housing Ltd products are (Product 1) and (Product 2). Product 1 is produced by the A Process in a simple operation Product B is manufactured by the B Process, a more complex operation with more production stages. Both products are sold by the metre. Details of the two products are Product 1 Product 2 Monthly volume 1.000 metres 500 metres Batch size 1,000 metres Processing time per batch A Process 100 hours 8 Process 25 hours Set-ups per batch 1 2 Handling charges per batch 1 movement Smovements 15 Materials permetre 16 Direct labour permetre Direct labour is paid at 36 per hours. Required: i. Calculate the price per metre for both Product 1 and Product 2 detailed above, using traditional absorption costing based on direct labour hours. (35 marks) il. Calculate the price per metre for both Product 1 and Product 2 using activity-based costing. Assume that "Other overheads' are allocated using direct labour hours. (50 marks) ii. Outline the points that you would raise with the management of Housing Ltd in the light of your answers to (a) and (b). Provide five valid reasons and justify them (Maximum five valid points and 250 words. Each point will be awarded 3 marks) (15 marks) Total 100 marks Question 4 (answer all parts of the question) Housing Ltd manufactures a range of products used in the building industry Manufacturing is undertaken using one of two processes: the A Process and the 8 Process. All of the products are manufactured in batches. The current pricing policy has been to absorb all overheads using direct labour hours to obtain total cost. Price is then calculated as total cost plus a 35 per cent mark-up A recent detailed analysis has examined overhead cost, the results are Analysis of overhead costs Cost per month ) Monthly volume(K) A Process cost 96,000 480 hours Process cost 1,280 hours Set-up cost 42,900 260 stup Handling charges 45,600 380 movements Other overheads 50,700 see below) Total overhead costs 280,000 There are 4,000 direct labour hours available each month Two of Housing Ltd products are (Product 1) and (Product 2). Product 1 is produced by the A Process in a simple operation. Product 8 is manufactured by the B Process, a more complex operation with more production stages. Both products are sold by the metre. Details of the two products are Product 1 Product 2 Monthly volume 1,000 metres 500 metres Batch sie 1,000 50 metres Processing time per batch A Process -B Process 25 hours Set-ups per batch Handling charges per batch 2 5-movements E15 Materials permetre Direct labour permetre 16 hour 16 hour Direct labour is paid at 16 per hours Required: L Calculate the price per metre for both Product 1 and Product 2 detailed above, using traditional absorption costing based on direct labour hours. (35 marks) Calculate the price per metre for both Product 1 and Product 2 using activity-based costing. Assume that "Other overheads are allocated using direct labour hours. (50 marks) . Outline the points that you would raise with the management of Housing Ltd in the light of your answers to (a) and (b). Provide five valid reasons and justify them. (Maximum five valid points and 250 words. Each point will be awarded 3 marks) (15 marks) Total 100 marks 100 hours - 1 I movement 16 Housing Ltd manufactures a range of products used in the building industry Manufacturing is undertaken using one of two processes: the A Process and the B Process. All of the products are manufactured in batches. The current pricing policy has been to absorb all overheads using direct labour hours to obtain total cost. Price is then calculated as total cost plus a 35 per cent markup A recent detailed analysis has examined overhead cost the results are Analysis of overhead costs Cost per month (1) Monthly volume ( A Process cost 96,000 480 hours B Process cost 44,300 1,290 hours Set-up cost 42.900 260 set-ups Handling charges 45.600 380 movements Other overheads 50,700 Total overhead costs 280,000 There are 4,000 direct labour hours available each month Two of Housing Ltd products are (Product 1) and (Product 2). Product 1 is produced by the A Process in a simple operation Product B is manufactured by the B Process, a more complex operation with more production stages. Both products are sold by the metre. Details of the two products are Product 1 Product 2 Monthly volume 1.000 metres 500 metres Batch size 1,000 metres Processing time per batch A Process 100 hours 8 Process 25 hours Set-ups per batch 1 2 Handling charges per batch 1 movement Smovements 15 Materials permetre 16 Direct labour permetre Direct labour is paid at 36 per hours. Required: i. Calculate the price per metre for both Product 1 and Product 2 detailed above, using traditional absorption costing based on direct labour hours. (35 marks) il. Calculate the price per metre for both Product 1 and Product 2 using activity-based costing. Assume that "Other overheads' are allocated using direct labour hours. (50 marks) ii. Outline the points that you would raise with the management of Housing Ltd in the light of your answers to (a) and (b). Provide five valid reasons and justify them (Maximum five valid points and 250 words. Each point will be awarded 3 marks) (15 marks) Total 100 marks Question 4 (answer all parts of the question) Housing Ltd manufactures a range of products used in the building industry Manufacturing is undertaken using one of two processes: the A Process and the 8 Process. All of the products are manufactured in batches. The current pricing policy has been to absorb all overheads using direct labour hours to obtain total cost. Price is then calculated as total cost plus a 35 per cent mark-up A recent detailed analysis has examined overhead cost, the results are Analysis of overhead costs Cost per month ) Monthly volume(K) A Process cost 96,000 480 hours Process cost 1,280 hours Set-up cost 42,900 260 stup Handling charges 45,600 380 movements Other overheads 50,700 see below) Total overhead costs 280,000 There are 4,000 direct labour hours available each month Two of Housing Ltd products are (Product 1) and (Product 2). Product 1 is produced by the A Process in a simple operation. Product 8 is manufactured by the B Process, a more complex operation with more production stages. Both products are sold by the metre. Details of the two products are Product 1 Product 2 Monthly volume 1,000 metres 500 metres Batch sie 1,000 50 metres Processing time per batch A Process -B Process 25 hours Set-ups per batch Handling charges per batch 2 5-movements E15 Materials permetre Direct labour permetre 16 hour 16 hour Direct labour is paid at 16 per hours Required: L Calculate the price per metre for both Product 1 and Product 2 detailed above, using traditional absorption costing based on direct labour hours. (35 marks) Calculate the price per metre for both Product 1 and Product 2 using activity-based costing. Assume that "Other overheads are allocated using direct labour hours. (50 marks) . Outline the points that you would raise with the management of Housing Ltd in the light of your answers to (a) and (b). Provide five valid reasons and justify them. (Maximum five valid points and 250 words. Each point will be awarded 3 marks) (15 marks) Total 100 marks 100 hours - 1 I movement 16