Required:

What overheads will be traced to the batch and what is the production cost of the batch in total and per unit? [10 marks]

A firm XYZ has separated its main support activities into cost pool and has selected appropriate cost drivers thus: Cost Pool Cost driver Set-up No of set-ups Quality control No of inspections Material procurement No of orders Engineering design No of design drawings Machinery No of machinery hours Cost Pool RM Cost driver Budgeted Volume Set-up 110000 No of set-ups 4500 Quality control 185000 No of inspections 7000 Material procurement 420000 No of orders 385 Engineering design 292000 No of design drawings Machinery 360000 No of machinery hours 100000 550 Cost driver rates Set-up RM 110000/4500 = RM 24.4 per set up Quality control RM 185000/7000 = RM 26.4 per inspection Material procurement RM 420000/385 = RM 1091 per order Engineering design RM 292000/550 = RM 531 per drawing Machinery RM 360000/100000 = RM 3.6 per hour A batch of 3500 Pat NoAX111 has a direct cost (material and labour) of RM 155250 and usage activities as follows: 213 set-ups 319 inspections 23 purchase orders 17 engineering drawings 3810 machine hours