习题1-Costing

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20
1,750
12
1,250
25
7,000
Direct labour costs $6 per hour and production overheads are absorbed on a machine hour basis. The overhead absorption rate for the period is $28 per machine hour.
(4 marks)
(d) Discuss the implications of a switch to ABC on pricing and profitability.
(6 marks)(25 maຫໍສະໝຸດ ks)Answer:
2 Edward Co assembles and sells many types of radio. It is considering extending its product range to include digital radios. These radios produce a better sound quality than traditional radios and have a large number of potential additional features not possible with the previous technologies (station scanning, more choice, one touch tuning, station identification text and song identification text etc).
Required:
(a) Calculate the cost per unit for each product using traditional methods, absorbing overheads on the basis of
machine hours.
(3 marks)
Total production overheads are $654,500 and further analysis shows that the total production overheads can be divided as follows:
A radio is produced by assembly workers assembling a variety of components. Production overheads are currently absorbed into product costs on an assembly labour hour basis.
Number of movements of materials 112 121 187
Number of inspections
1,150 1,180 1,670
670
120
1,000
Required:
(b) Calculate the cost per unit for each product using ABC principles (work to two decimal places). (12 marks)
(c) Explain why costs per unit calculated under ABC are often very different to costs per unit calculated under
more traditional methods. Use the information from Triple Limited to illustrate.
Product D Product C Product P
Hours per unit
Labour hours Machine hours
½


1
1
3
Materials Production
Cost per unit ($) Units
Edward Co is considering a target costing approach for its new digital radio product.
Required: (a) Briefly describe the target costing process that Edward Co should undertake.
%
Costs relating to set-ups
35
Costs relating to machinery
20
Costs relating to materials handling
15
Costs relating to inspection
30
Total production overhead
100
The following total activity volumes are associated with each product line for the period as a whole:
Product D Product C Product P
Number of Set ups 175 115 480
ACCA F5
For the exam -2014 June Prepared by: Celine Ji
1 Triple Limited makes three types of gold watch – the Diva (D), the Classic (C) and the Poser (P). A traditional product costing system is used at present; although an activity based costing (ABC) system is being considered. Details of the three products for a typical period are: