K Machine department costs (rent, business rates, depreciation and supervision) 10,430 Set-up costs 5,5250 Stores receiving 3,600 Inspection/Quality control 2,100 Materials handling and dispatch 4,620 26,000 You have ascertained that the 'cost drivers' to be used are as listed below for the overhead costs shown: Cost Set-up costs Stores receiving Inspection/quality control Materials handling and dispatch Cost driver Number of production runs Requisition raised Number of production runs Orders executed The number of requisitions raised on the stores was 20 for each product and the number of orders executed was 42, each order being for a batch of 10 of a product. REQUIRED; 1 Calculate the total costs for each product if all overhead costs are absorbed on a machine hour basis. 2 Calculate the total costs for each product, using activity-based costing. 3 Calculate and list the unit product costs from your figures in items 1 and 2 above. K Machine department costs (rent, business rates, depreciation and supervision) 10,430 Set-up costs 5,5250 Stores receiving 3,600 Inspection/Quality control 2,100 Materials handling and dispatch 4,620 26,000 You have ascertained that the 'cost drivers' to be used are as listed below for the overhead costs shown: Cost Set-up costs Stores receiving Inspection/quality control Materials handling and dispatch Cost driver Number of production runs Requisition raised Number of production runs Orders executed The number of requisitions raised on the stores was 20 for each product and the number of orders executed was 42, each order being for a batch of 10 of a product. REQUIRED; 1 Calculate the total costs for each product if all overhead costs are absorbed on a machine hour basis. 2 Calculate the total costs for each product, using activity-based costing. 3 Calculate and list the unit product costs from your figures in items 1 and 2 above. QUESTION TWO Having attended a CIMA course on activity-based costing (ABC), you decide to experiment by applying the principles of ABC to the four products currently made and sold by your company. Details of the four products and relevant information are given below for one period: PRODUCT Output in units Costs per unit (K): Direct material Direct labour Machine hours (per unit) A B C D 120 100 80 120 40 50 30 60 28 21 14 21 4 3 2 3 The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production overhead is currently absorbed by using a machine hour rate, and the total of the production overhead for the period has been analysed as follows