Question
Lakers Ltd is considering three projects and has decided to apply ABC analysis to estimate the costs of the projects. Additional information relating to the
Lakers Ltd is considering three projects and has decided to apply ABC analysis to estimate the costs of the projects. Additional information relating to the prospective projects is as follows. Activities Costs ($) Cost Drivers Material handling 240 000 # of orders 1 220 Set-ups 126 880 # of set-ups 2 800 Stores 132 000 # stores requisition 955 Machining 168 000 # of machine hours 448 Quality control 120 000 # of inspections 200 The following information was obtained from the company. Project X Project Y Direct materials $68 400 $72 800 Direct labour $54 250 $61 320 # of orders 74 68 # of set-ups 34 26 # of stores requisition 52 66 # of machine hours 48 60 # of inspections 65 56 Required: A. Calculate the cost driver rates for each activity. (5 marks) B. Calculate the total cost of each project using the ABC approach. (13 marks) C. Differentiate between Activity Based Costing and Traditional Costing. (2 marks)
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