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William ltd co. makes three main products x,y,z. details of the products for a particular period are as follows:
hours/unit material/unit volumes (units)
labour machinery $product x 0.5 1.5 20 750
product y 1.5 1 12 1250
product z 1 3 25 7000direct labour costs are $6/hour. total over heads are $654500. over heads are driven by activities are follows:
setup costs 35%
machinery cost 20%
material handling 15%
inspection costs 30%following activity drivers are associated with the product line for the period as follows:
no. of setups no. of no. of
movements inspections
in materialproduct x 75 12 150
product y 115 21 180
product z 480 87 670requirement: calculate cost/unit for each product for each product using ABC costing
What is the point in copying out an entire question and expecting others to solve it for you?
Watch the free lecture on ABC, and then ask about whichever part of the answer is causing you difficulty (presumably if you have the question then you also have the answer!).
It is a very standard ABC question, and if you have watched the free lecture you should have no real difficulty with it.
Thanks for replying Sir. my question actually is what base should i choose to absorb the machinery costs as we have machine hours given but rate/ hour is not there… can i go with labour hours..?
But you can calculate the rate per machine hour.
You know how many units of each product are produced and you know how many machine hours per unit. So you can calculate the total number of machine hours.Then the rate per machine hour is the total machine cost (20% x 654500) divided by the total number of machine hours.
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