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Absorption costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Absorption costing

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by LMR1006.
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  • May 25, 2024 at 8:48 am #705985
    sooha
    Participant
    • Topics: 62
    • Replies: 71
    • ☆☆

    Q39 kaplan
    A company is changing its costing system from traditional absorption costing based on
    labour hours to activity-based costing. It has overheads of $156,000 which are related to
    taking material deliveries.
    The delivery information about each product is below.
    Product: X Y Z
    Total units required 1,000 2,000 3,000
    Delivery size 200 400 1,000
    Total labour costs are $360,000 for 45,000 hours. Each unit of each product takes the same
    number of direct hours.
    Assuming that the company uses the number of deliveries as its cost driver, what will be
    the effect on the costs per unit following the change from absorption costing to activity-
    based costing?’ Place a tick in the boxes in the table below where appropriate.

    the question is since he gave us the total hour and each product take the same number of direct hours why don’t just divide the fixed cost by total hour

    156000/45000

    why in the answer they divided by unite number?

    May 25, 2024 at 3:17 pm #706009
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1511
    • ☆☆☆☆☆

    The answer takes 156,000/6000 = 26 for absorption

    And then takes 156,000 / no delivery 13 = 12000
    So you take 12000 /1000 * 5 = 60 inc of 34
    12000/2000 * 5 = 30 inc of 4
    12000/3000 * 3 = 12 dec of 14

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