Question
Your company currently produces and sells 4 products, Alpha, Beta, Gamma and Delta. The following information relates to Period 3. Alpha Beta Gamma Delta Production
Your company currently produces and sells 4 products, Alpha, Beta, Gamma and Delta. The following information relates to Period 3. Alpha Beta Gamma Delta Production (units) 180 150 120 180 Costs per unit: Direct material Br. 46 Br. 58 Br. 35 Br. 70 Direct labour Br. 21 Br. 14 Br. 7 Br. 14 Machine hours per unit 4 3 2 3 Number of production runs 6 5 4 6 Number of requisitions raised 30 30 30 30 Number of orders completed 18 15 12 18 Currently the production overhead is absorbed by the machine-hour rate method and the following are the total production overhead costs for Period 3. Machine Department Br. 24,540 Set-up costs 6,300 Receiving costs 7,200 Inspection costs 3,150 Despatch costs 7,560 48,750 Cost drivers have been identified as follows: Set-up costs Number of production runs Stores receiving Number of requisitions raised Inspection Number of production runs Despatch Number of orders completed You are required to calculate: (a) (i) The machine-hour rate currently used to absorb the production overhead. (ii) The total cost per unit for each product if overheads are absorbed by the method in (a)(i). (b) The cost per unit for each product using an ABC approach.
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