Traditional Costing – NBC Institute

PM – Nov 2016 – Q2 – Cost Management Strategies

Question requires explanation of Life Cycle Costing concepts and calculation of unit costs over 3-year product lifecycle for a CD manufacturer.

Question

Tadesco Limited manufactures Compact Disks. It is planning to introduce a new model and production will begin very soon. It expects the new product to have a life cycle of three years and the following costs have been estimated.

You are required to:
a. Explain Life Cycle Costing and state what distinguishes it from traditional costing technique. (10 Marks)
b. Calculate the cost per unit over the whole life cycle and comment on the price to be charged. (10 Marks)

Answer

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Tags: Cost Analysis, Life Cycle Costing, Manufacturing Costs, Product Life Cycle, Traditional Costing
Level: Level 2

Topic: Cost Management Strategies
Series: NOV 2016

PM – Mar/Jul 2020 – L2 – Q3 – Activity-Based Costing vs. Traditional Costing for Sedeco Nigeria

Calculation of unit costs for three products using traditional and activity-based costing approaches.

Question

Sedeco Nigeria Limited manufactures and sells three products, Alpha, Beta, and Gamma. For some time now, the company has been concerned about its cost allocation system and has been searching for a more efficient way of cost allocation. The company recently employed a management accountant who informed the management that activity-based costing is a more efficient cost allocation system, leading to improvements in cost accuracy and reduction.

The management accountant discovered that the company has direct materials, direct labor, and five indirect cost pools which represent the five activity areas. The prior product costing system uses the two direct cost categories and a single indirect cost pool where overheads are allocated using direct labor hours. The following information is provided for the next period:

Direct labor is paid at N100 per hour. Overhead costs in the period are expected to be as follows:

Also, the company is considering the pricing of the three products because sales prices have remained uncertain as shown in the table below:

Required:
a. Calculate the unit costs of each product using:
(i) Prior product costing approach (traditional cost)
(ii) The Activity-Based Costing method (ABC). (10 Marks)

b. Compute the expected sales prices for the three products and the profit or loss that will arise from the implementation of the ABC costing approach and the traditional costing method. (8 Marks)

c. State reasons why the activity-based costing approach may be preferred to the traditional absorption costing approach in a modern manufacturing environment. (2 Marks)

Answer

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Tags: Activity-Based Costing, Cost Allocation, Pricing Decisions, Profit Calculation, Traditional Costing
Level: Level 2

Series: MAR/JULY 2020

MI – May 2017 – L1 – SB – Q1 – Costing Techniques

Compare production costs using traditional absorption costing and activity-based costing.

Question

LADECK Nigeria Limited makes and sells two products A and B. The company is considering the introduction of an activity-based costing approach to facilitate efficient cost allocation, improvement in cost accuracy, and reduction.

The following information is provided in respect of production and sales for the next period:

	PRODUCT A	PRODUCT B	TOTAL
Production and sales (units)	40,000	20,000	60,000
Direct material cost/unit	N25	N20	N1,400,000
Direct labour hours	3	4	200,000
Machine hours	2	5	180,000
Number of production runs	15	25	40
Number of component receipts	70	90	160
Number of production orders	30	20	50

The direct labour hour is paid at N8 per hour.

Budgeted production overhead is absorbed using a direct labour hour rate, and the budgeted overhead is expected to be as follows:

Cost Pool	Amount	Cost Driver
Machine	N900,000	Machine hours
Set-up costs	N140,000	Production runs
Carriage inwards	N280,000	Company receipts
Packaging	N200,000	Production orders
	N1,520,000

Required:

a. Calculate the full production costs for the two products using traditional absorption costing (absorbing production overhead on a direct labour hour basis). (6 Marks)
b. Calculate the full production costs for the two products using the activity-based costing approach. (14 Marks)

Answer

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Tags: Activity-Based Costing, Cost Allocation, Traditional Costing
Level: Level 1

Topic: Costing Techniques
Series: MAY 2016

MA – Nov 2016 – L2 – Q1b – Activity-based costing

Explain the similarities and differences between activity-based costing and the traditional system of assigning overheads to products.

Question

Identify and explain briefly THREE similarities and TWO differences between activity-based costing and the traditional system of assigning overheads to products. (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Activity-Based Costing, Cost Drivers, Cost Pools, Overhead Allocation, Traditional Costing
Level: Level 2

Topic: Activity-based costing
Series: NOV 2016

PM – Nov 2016 – Q2 – Cost Management Strategies

Question requires explanation of Life Cycle Costing concepts and calculation of unit costs over 3-year product lifecycle for a CD manufacturer.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Analysis, Life Cycle Costing, Manufacturing Costs, Product Life Cycle, Traditional Costing
Level: Level 2

Topic: Cost Management Strategies
Series: NOV 2016

PM – Mar/Jul 2020 – L2 – Q3 – Activity-Based Costing vs. Traditional Costing for Sedeco Nigeria

Calculation of unit costs for three products using traditional and activity-based costing approaches.

Question

b. Compute the expected sales prices for the three products and the profit or loss that will arise from the implementation of the ABC costing approach and the traditional costing method. (8 Marks)

c. State reasons why the activity-based costing approach may be preferred to the traditional absorption costing approach in a modern manufacturing environment. (2 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Activity-Based Costing, Cost Allocation, Pricing Decisions, Profit Calculation, Traditional Costing
Level: Level 2

Series: MAR/JULY 2020

MI – May 2017 – L1 – SB – Q1 – Costing Techniques

Compare production costs using traditional absorption costing and activity-based costing.

Question

The following information is provided in respect of production and sales for the next period:

	PRODUCT A	PRODUCT B	TOTAL
Production and sales (units)	40,000	20,000	60,000
Direct material cost/unit	N25	N20	N1,400,000
Direct labour hours	3	4	200,000
Machine hours	2	5	180,000
Number of production runs	15	25	40
Number of component receipts	70	90	160
Number of production orders	30	20	50

The direct labour hour is paid at N8 per hour.

Budgeted production overhead is absorbed using a direct labour hour rate, and the budgeted overhead is expected to be as follows:

Cost Pool	Amount	Cost Driver
Machine	N900,000	Machine hours
Set-up costs	N140,000	Production runs
Carriage inwards	N280,000	Company receipts
Packaging	N200,000	Production orders
	N1,520,000

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Activity-Based Costing, Cost Allocation, Traditional Costing
Level: Level 1

Topic: Costing Techniques
Series: MAY 2016

MA – Nov 2016 – L2 – Q1b – Activity-based costing

Explain the similarities and differences between activity-based costing and the traditional system of assigning overheads to products.

Question

Identify and explain briefly THREE similarities and TWO differences between activity-based costing and the traditional system of assigning overheads to products. (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Activity-Based Costing, Cost Drivers, Cost Pools, Overhead Allocation, Traditional Costing
Level: Level 2

Topic: Activity-based costing
Series: NOV 2016

Question Tag: Traditional Costing

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PM – Nov 2016 – Q2 – Cost Management Strategies

Question requires explanation of Life Cycle Costing concepts and calculation of unit costs over 3-year product lifecycle for a CD manufacturer.

PM – Mar/Jul 2020 – L2 – Q3 – Activity-Based Costing vs. Traditional Costing for Sedeco Nigeria

Calculation of unit costs for three products using traditional and activity-based costing approaches.

MI – May 2017 – L1 – SB – Q1 – Costing Techniques

Compare production costs using traditional absorption costing and activity-based costing.

MA – Nov 2016 – L2 – Q1b – Activity-based costing

Explain the similarities and differences between activity-based costing and the traditional system of assigning overheads to products.

PM – Nov 2016 – Q2 – Cost Management Strategies

Question requires explanation of Life Cycle Costing concepts and calculation of unit costs over 3-year product lifecycle for a CD manufacturer.

PM – Mar/Jul 2020 – L2 – Q3 – Activity-Based Costing vs. Traditional Costing for Sedeco Nigeria

Calculation of unit costs for three products using traditional and activity-based costing approaches.

MI – May 2017 – L1 – SB – Q1 – Costing Techniques

Compare production costs using traditional absorption costing and activity-based costing.

MA – Nov 2016 – L2 – Q1b – Activity-based costing

Explain the similarities and differences between activity-based costing and the traditional system of assigning overheads to products.

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Question Tag: Traditional Costing

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PM – Nov 2016 – Q2 – Cost Management Strategies

Question requires explanation of Life Cycle Costing concepts and calculation of unit costs over 3-year product lifecycle for a CD manufacturer.

You're reporting an error for "PM – Nov 2016 – Q2 – Cost Management Strategies"

PM – Mar/Jul 2020 – L2 – Q3 – Activity-Based Costing vs. Traditional Costing for Sedeco Nigeria

Calculation of unit costs for three products using traditional and activity-based costing approaches.

You're reporting an error for "PM – Mar/Jul 2020 – L2 – Q3 – Activity-Based Costing vs. Traditional Costing for Sedeco Nigeria"

MI – May 2017 – L1 – SB – Q1 – Costing Techniques

Compare production costs using traditional absorption costing and activity-based costing.

You're reporting an error for "MI – May 2017 – L1 – SB – Q1 – Costing Techniques"

MA – Nov 2016 – L2 – Q1b – Activity-based costing

Explain the similarities and differences between activity-based costing and the traditional system of assigning overheads to products.

You're reporting an error for "MA – Nov 2016 – L2 – Q1b – Activity-based costing"

PM – Nov 2016 – Q2 – Cost Management Strategies

Question requires explanation of Life Cycle Costing concepts and calculation of unit costs over 3-year product lifecycle for a CD manufacturer.

You're reporting an error for "PM – Nov 2016 – Q2 – Cost Management Strategies"

PM – Mar/Jul 2020 – L2 – Q3 – Activity-Based Costing vs. Traditional Costing for Sedeco Nigeria

Calculation of unit costs for three products using traditional and activity-based costing approaches.

You're reporting an error for "PM – Mar/Jul 2020 – L2 – Q3 – Activity-Based Costing vs. Traditional Costing for Sedeco Nigeria"

MI – May 2017 – L1 – SB – Q1 – Costing Techniques

Compare production costs using traditional absorption costing and activity-based costing.

You're reporting an error for "MI – May 2017 – L1 – SB – Q1 – Costing Techniques"

MA – Nov 2016 – L2 – Q1b – Activity-based costing

Explain the similarities and differences between activity-based costing and the traditional system of assigning overheads to products.

You're reporting an error for "MA – Nov 2016 – L2 – Q1b – Activity-based costing"

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