XYZ-Budget data six months to 30 June 2004

                                                                                         Product Alpha     Product Sigma

Material Cost per Product Unit                                                  $60                     $45

Production line A- machine hours per unit                                   0.8                     0.5

Production batch size units                                                           100                    200

Total production units    Use your Arid No. Last 4 Digits for Alpha and 1.75 time your Arid No. for Sigma 

Components per product unit quantity                                          20                        12

Number of customers                                                                    5                            10

Number of production line set- ups                                              15                           25

Production line A-maintenance hours                                 300                         150    

 

XYZ makes and sells a range of products. Management has carried out an analysis of the total cost of production. The analysis has identified that the factory is organized in order to permit the operation of three production lines A, B and C. Each production line facilities the production of two or more products. Production line A is only used for the production of products Alpha and Sigma. The products are manufactured in batches JIT basis in order to fulfill orders from customers. Only one product can be manufactured on the production line at any one time. Materials are purchased and received on a JIT basis. Additional information is available for production line A as follows:

i. Production line machine costs including labor, power, etc., vary in proportion to machine hours.

ii. Costs incurred for production scheduling, WIP movement, purchasing and receipts of materials are assumed to be incurred in proportion to the number of batches of product which are manufactured. Machine set-up costs vary in proportion to the number of set-ups required and are linked to a batch throughput system.

iii. Cost for materials scheduling systems and design/testing routine are assumed to be incurred by each product in proportion to the total quantity of components purchased and total number of types of components designed/tested for products Alpha and Sigma are 12 and 8 respectively.

iv. Product line development cost is identified with changes in product design and production method. At present such cost for production line A are apportioned 80%:20% to product Alpha and Sigma respectively. Production line maintenance costs are assumed to vary in production to the maintenance hours required for each product.

Required: (1)  prepare an activity based  budget for production line X for the six month period to 30 June 2004 analyzed into sub-sets for activities which are product unit based, batch based, product sustaining, production line sustaining. 

The budget should show: (a) Total cost of each activity sub-sets grouped to reflect the differing operational levels at which each sub-sets is incurred/controlled. (b)  Average cost per unit for each of products A and B analyzed by activity sub-set.