- 15 Marks
MA – Aug 2022 – L2 – Q2a – Activity-based costing
This question asks for the calculation of activity rates and the cost per unit of product X using activity-based costing.
Question
The details of unit cost of products X, Y, and Z have been provided below:
| Product | X | Y | Z |
|---|---|---|---|
| Demand (units) | 1,200 | 2,800 | 3,000 |
| GH¢ | GH¢ | GH¢ | GH¢ |
| Direct Material | 70 | 55 | 40 |
| Direct Labour | 65 | 60 | 38 |
| Variable Overheads | 11 | 8 | 7 |
| Fixed Overhead | 32 | 24 | 20 |
Additional information:
- The fixed overheads were absorbed at the rate of GH¢8 per machine hour.
- The budgeted fixed overheads of GH¢165,600 can be analysed into the following cost pools with their respective percentages for apportionment:
Cost Pool Percentages (%) Batch 20 Machinery 45 Customer service 25 Deliveries 10 - The following also relates to the activities of the company:
| Product | X | Y | Z |
|---|---|---|---|
| Units in a batch | 120 | 140 | 200 |
| Quantities per delivery | 100 | 280 | 250 |
| Number of customers | 50 | 180 | 220 |
Required:
i) Calculate the activity rates per batch, machine hour, customer service, and delivery.
(12 marks)
ii) Calculate the total cost of a unit of product X.
(3 marks)
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