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1.I have a problem where the following information is provided.
Direct labor hour/unit A: 5 B:5
Annual output unit: A: 1200 B: 12 000
Total direct labor hours. 110 000The problem asks to calculate overhead cost per unit. Overhead is 420 000
My question is the following
Which figure do I need to take a denominator. Because 5*1200+5*12000= 66000 which is not equal to 110 000.
2. The following statement relates to justification of life-cycle costing.
Traditional cap budgeting techniques do not attempt to minimize the cost or max revenues over the product life cycle.
From my previous studies I remember that cap budgeting tech are NPV, IRR and this kind of financial stuff. I cannot understand how this is a justification of life cycle costing.You take 100,000 as denominator. You are only looking at products A and B but presumably there are other products also being made that we are not interested in!!
A justification of life-cycle costing is precisely that it does take into account the life cycle whereas the other methods do not.
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