- 10 Marks
MA – July 2023 – L2 – Q3a – Activity-Based Costing
This question involves calculating the cost driver rates and overhead cost per unit using the Activity-Based Costing (ABC) technique for three products under the 1D1F policy.
Question
The following three products are produced by a company under the “1D1F” policy with additional information provided.
| Product | Cee | Dee | Gee |
|---|---|---|---|
| Units | 4,000 | 6,000 | 4,800 |
| Labour hours per unit | 3 | 2.5 | 1.5 |
| Number of units in a batch | 400 | 500 | 600 |
| Number of machine hours per unit | 4 | 5 | 7 |
The annual overheads have been grouped under three headings:
| Overhead Category | Amount (GH¢) |
|---|---|
| Labour related | 45,000 |
| Batch related | 69,000 |
| Machine related | 120,000 |
Required:
i) Using the Activity Based Costing (ABC) technique, calculate the Cost Driver Rates for each group of overheads.
(6 marks)
ii) Calculate the overhead cost per unit of product “Cee” under the ABC technique.
(4 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Activity-Based Costing, Cost driver rates, Overhead Allocation
- Level: Level 2
- Topic: Activity-based costing
- Series: JULY 2023