ACCA PM · Guided practice (Show me how)
Chapter 1: Activity based costing
Activity based costing: cost pools, driver rates and cost per unit
Una manufactures three products: A, B and C. Data for the period just ended is as follows:
| A | B | C | |
|---|---|---|---|
| Production (units) | 20,000 | 25,000 | 2,000 |
| Sales price (per unit) | $20 | $20 | $20 |
| Material cost (per unit) | $5 | $10 | $10 |
| Labour hours (per unit) | 2 hours | 1 hour | 1 hour |
Labour is paid at the rate of $5 per hour.
Overheads for the period were: set-up costs $90,000; receiving $30,000; despatch $15,000; machining $55,000; in total $190,000.
| Cost driver data | A | B | C |
|---|---|---|---|
| Machine hours per unit | 2 | 2 | 2 |
| Number of set-ups | 10 | 13 | 2 |
| Number of deliveries received | 10 | 10 | 2 |
| Number of orders despatched | 20 | 20 | 20 |
(a) Calculate the cost (and hence profit) per unit, absorbing all the overheads on the basis of labour hours. (b) Calculate the cost (and hence profit) per unit absorbing the overheads using an activity based costing approach.
(a) Cost per unit on a labour-hour basis
Calculate Una's total labour hours, overhead absorption rate and full cost per unit of A and C for the period just ended.
(b) Cost pools and cost driver rates
Calculate Una's activity cost driver rates for the period just ended.
(b) Product C under ABC
Calculate the overhead charged to Una's product C, its overhead per unit and its profit or loss per unit for the period just ended.
Opening this exercise…