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ABC COsting 2

The document outlines a worksheet for an A/S Level Accounting topic on Activity Based Costing (ABC) for two products, Product X and Product Y. It provides budgeted production data, including units, machine hours, labor hours, and costs, and poses questions regarding unit production costs, selling prices, and the implications of using ABC for overhead allocation. Additionally, it seeks advice on whether to adopt ABC based on the calculated differences in costs and prices between traditional and ABC methods.

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Sara Bhamani
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21 views1 page

ABC COsting 2

The document outlines a worksheet for an A/S Level Accounting topic on Activity Based Costing (ABC) for two products, Product X and Product Y. It provides budgeted production data, including units, machine hours, labor hours, and costs, and poses questions regarding unit production costs, selling prices, and the implications of using ABC for overhead allocation. Additionally, it seeks advice on whether to adopt ABC based on the calculated differences in costs and prices between traditional and ABC methods.

Uploaded by

Sara Bhamani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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A S /A LEVEL

2023-24
SUBJECT: Accounting
NAME : ________________________________________ DOI:
TOPIC: ABC Costing DOS:
Worksheet No:___
Young manufactures two products, Product X and Product Y. The following budgeted information is
available.

Product X Product Y
Production units 5 000 5 000
Machine hours 10 000 20 000
Labour hours 5 000 7 500
Direct materials (per unit) $60 $75
Direct labour (per hour) $25 $30

Total production overheads, $180 000, are to be allocated to each product on the basis of machine
hours. A 50% mark-up will be added to the production cost of each product to set the selling price.

Answer the following questions in the Question Paper. Questions are printed here for
reference only.

(a) Calculate for each product the unit production cost and unit selling price. [7]

Additional information

On the advice of the management accountant, Young is considering using activity based costing
(ABC) to allocate the production overheads to both products. The following information is
available.
$ Product X Product Y
Machine set up 120 000 20 times 10 times
Materials handling 45 000 10 receipts 5 receipts
Inspection 15 000 150 hours 100 hours
180 000

(b) State what is meant by ‘Activity Based Costing (ABC)’. [1]

(c) Recalculate for each product the unit production cost and the unit selling price using ABC. [7]

(d) (i) Calculate the difference between the unit production overhead charged to Product X and
to Product Y using each method. [3]

(ii) Calculate the difference between the unit selling price using the two costing methods for
Product X and Product Y.
[2]

(e) Advise Young whether or not he should change the method of allocating production
overhead costs to ABC. Justify your answer. [5]
[Total: 25]

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