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RS has recently introduced an activity based costing system. RS manufactures two products, details of which are given below:
product R product S
budgeted production per annum(units) 80000 60000
batch size(units) 100 50
machine set-ups per batch 3 3
processing time per units(minutes) 3 5the budgeted annual costs for two activities are as follows:
$
machine set-up 180000
processing 108000what is the budgeted machine set-up cost per unit of product S ?
A) 1.50
B) 1.80
C) 30
D) 150I would be thankful for your answers to the above question.
budgeted production per annum(units) for product s: 60000
batch size(units) for product s: 50
machine set-ups per batch for product s: 3
processing time per unit( minutes) for product s: 5But you must have an answer in the same book in which you found the question!!
You should use this forum to ask about which part of the answer you are not clear about – not to simply expect answers.
(I assume that you have watched my free lectures on ABC? The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.)
yes indeed, i have watched your lecturers and i have gone through opentuition notes.
in fact i know the answer( B ). but I could not understand the workings at all which was explained in the book. therefore I humbly seek your help and guidanceregards
The number of batches of R is 80,000/100 = 800, and so the number of machine set-ups is 800 x 3 = 2,400.
The number of batches of S is 60,000 / 50 = 1,200, and so the number of set-ups is 1,200 x 3 = 3,600.
So the total number of set-ups is 2,400 + 3,600 = 6,000.
So the cost per set-up = 180,000 / 6,000 = $30.
So the total cost of set-ups for S = 3,600 x $30 = $108,000
So per unit = $108,000 / 60,000 = $1.80
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