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Question 3 Greenery Machines makes and sells two products, X and Y. Data for production and sales each month are as follows: Product X
Question 3 Greenery Machines makes and sells two products, X and Y. Data for production and sales each month are as follows: Product X Product Y Sales demand 4,000 units 8,000 units Direct material cost/unit $20 $10 Direct labour hours/unit 0.1 hour 0.2 hours Direct labour cost/unit $2 $4 Production overheads are $500,000 each month. These are absorbed on a direct labour hour basis. An analysis of overhead costs suggests that there are four main activities that cause overhead expenditure. Activity Total cost Cost driver Total Product Product number X Y $ Batch setup 100,000 No. of set-ups 20 10 10 Order 200,000 No. of orders 40 24 16 handling Machining 120,000 Machine 15,000 6,000 9,000 hours Quality control 80,000 No. of checks 32 18 14 500,000
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