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See BPP study text in the section of exam question and answer bank, for the answer of the question of Abkaber part (bi)
I am not understanding this :
A traditional method of cost allocation, such as the one based on labour hours, was developed when an enterprise produced a narrow range of products which underwent similar operations and consumed similar proportions of overheads. Moreover, when such method were being widely used, overheads cost were only a very small proportion of total cost, with direct labour and materials cost accounting for the largest proportion of total cost.Abkaber has invested in new technology and as a result has significntly reduced the size of its workforce. Direct labour cost now account for a relatively smaller proportion of total cost with overheads making up the highest single cost item.
PLEASE EXPLAIN THIS TO ME IN SIMPLER WORDS ?????
If overheads are small (compared to other costs) then they do not have so big an effect on the cost of each unit.
Also, if all products use similar amounts of overheads, then again it is not so important how they are charged.However, now that labour is a much smaller cost, overheads are now much bigger (compared to other costs) and it become more important that they are charged more accurately between products.
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