Question
Two products, A and B, are made using similar equipment and methods. Data for the last period are: Product A Product B Units produced 6
Two products, A and B, are made using similar equipment and methods. Data for the last period are:
Product A Product B
Units produced 6 000 8 000
Labour hours per unit 1 2
Machine hours per unit 4 2
Set-ups in period 15 45
Orders handled in the period 12 60
Overheads for period relating to:
$ Production set-ups 179 000
Order handling 30 000
Machine activity 55 000
264 000
A. Calculate overheads to be absorbed per unit of each product based on:
i. absorption costing using labour hour absorption rate. (6 marks)
ii. an ABC approach using suitable cost drivers. (11 marks)
B. Distinguish between activity-based costing and traditional costing.
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