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Hi Sir, I am getting mixed up in a question re ABC:
The question says that Stores Administration is $5000 pa and the cost driver is Number of Different Components. Then I have a line saying that the Number of Components = 2000 items ( Total Activity pa)
However there is an additional note Each kettle uses 10 different components and will involve 6 production line set ups pa.
For all the overheads I have the same thing eg dispatch = 1000 – cost driver = num of dispatches, = 20000 dispatches then further note – 500 dispatches required pa!
Thanks a lot!
On the information you have given, the cost per component is 5,000/2,000 = $2.50.
If each kettle uses 10 components, then the overhead charged to 1 kettle will be 10 x $2.50 = $25.00.
I do suggest that you watch the free lecture on ABC.
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