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urgently plz Hemp Jamaica Limited manufactures bags using a type of marijuana called hemp. The company developed a process that created a material that is
urgently plz
Hemp Jamaica Limited manufactures bags using a type of marijuana called hemp. The company developed a process that created a material that is as sturdy as canvas. The company uses hemp to make handbags (HB) and knapsacks (KS). The strength of the hemp makes it ideal to make knapsacks to be used by school children. Due to the popularity of the product, the handbag (HB) is sold in large quantities overseas and monitored by the government. The handbags are subject to many more inspections than the knapsack. Because of the size of the knapsack, it uses a lot more machine hours than the handbag. The directors are concerned about the financial performance of these two products and are considering using activity-based costing (ABC) to account for overheads. Currently, they are using absorption costing based on machine hours. The table below gives the results for the previous accounting year. The following information has been provided to indicate the anticipated use of resources. Product KS HB No of inspections 16 No. of production runs 5 12 Units to be produced 350,000 500,000 10 The main overheads involved are: Cost pools % of total overheads Activity driver Assembling costs Quality control costs Production set up costs 80 15 5 Machine hours No. of inspections No. of set ups Total overhead costs are projected to be $3,200,000. Required: (a) If the overheads above were to be reallocated under ABC principles, how would you expect the new overhead costs to respond? (6 marks) The directors wish to introduce ABC for the coming year and have provided the following costs and selling prices data: (1) Hemp costs $4 per kg. KS uses 2.4 kg of hemp and HS uses one-quarter the amount. (ii) The cording used to create designs on each type of bag, costs $1.50 per meter. KS uses 1.2 meters per unit, while HS uses half that length of cording per bag. (iii)KS uses 25 minutes of machine time and HB uses 15 minutes of machine time. (iv)The machines used in assembling the bags cost $15 per hour to run. () The planned selling prices for KS and HB are $31.40 and $12.75 respectively. Required: (b) Calculate the cost per unit and the margin for the knapsacks (KS) and the handbag (HB) using machine hours to absorb overheads. (8 marks) (c) Calculate the cost per unit and the margin for the knapsacks (KS) and the handbag (HB) using activity-based costing to absorb overheads. (11 marks) Hemp Jamaica Limited manufactures bags using a type of marijuana called hemp. The company developed a process that created a material that is as sturdy as canvas. The company uses hemp to make handbags (HB) and knapsacks (KS). The strength of the hemp makes it ideal to make knapsacks to be used by school children. Due to the popularity of the product, the handbag (HB) is sold in large quantities overseas and monitored by the government. The handbags are subject to many more inspections than the knapsack. Because of the size of the knapsack, it uses a lot more machine hours than the handbag. The directors are concerned about the financial performance of these two products and are considering using activity-based costing (ABC) to account for overheads. Currently, they are using absorption costing based on machine hours. The table below gives the results for the previous accounting year. The following information has been provided to indicate the anticipated use of resources. Product KS HB No of inspections 16 No. of production runs 5 12 Units to be produced 350,000 500,000 10 The main overheads involved are: Cost pools % of total overheads Activity driver Assembling costs Quality control costs Production set up costs 80 15 5 Machine hours No. of inspections No. of set ups Total overhead costs are projected to be $3,200,000. Required: (a) If the overheads above were to be reallocated under ABC principles, how would you expect the new overhead costs to respond? (6 marks) The directors wish to introduce ABC for the coming year and have provided the following costs and selling prices data: (1) Hemp costs $4 per kg. KS uses 2.4 kg of hemp and HS uses one-quarter the amount. (ii) The cording used to create designs on each type of bag, costs $1.50 per meter. KS uses 1.2 meters per unit, while HS uses half that length of cording per bag. (iii)KS uses 25 minutes of machine time and HB uses 15 minutes of machine time. (iv)The machines used in assembling the bags cost $15 per hour to run. () The planned selling prices for KS and HB are $31.40 and $12.75 respectively. Required: (b) Calculate the cost per unit and the margin for the knapsacks (KS) and the handbag (HB) using machine hours to absorb overheads. (8 marks) (c) Calculate the cost per unit and the margin for the knapsacks (KS) and the handbag (HB) using activity-based costing to absorb overheads. (11 marks)Step by Step Solution
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