ABC Costing

Thanks for your quick response. You are highly appreciated for this. just one more thing to make sure about this that you said each unit takes 10 mints so we got 10mints from 9000units divided by production runs 900 which is 9000/900=10 . Please tell me that is my assumption is correct.

And as each units takes 10 minutes then 6 units takes one hour so how we got 1/6hours and that’s why 9000 units divided by 6. please ensure me now that is my understanding is correct on this calculations.

Thanks again for your help and God bless you always.

Thank you for your response. There were more information of Cost pool, Cost, Cost driver and Number of drivers for this question but i did not put it here because i thought its not related with my quires but there are also more additional information which might be related for this specific calculations.

Additional cost and profit information relates to product ZT3.

Component cost $1.00 per unit
Direct Labour: 10 minutes per unit at $7.80 per hour
and profit mark up: 40% of total unit cost.

Could you please make it clear to me now and i think its a complete question and there is no missing inforation for this calculation.

Kind Regards
Chowdhury

Thanks a lot. Hope i will come to you whenever i find any difficulty to understand any calculations.

Best Regards
Chowdhury

Dear Sir,

There are one past question which i did answer myself and then i checked with the answer given in exam kit and i found following calculations which i could not understand please help me out.

I am not typing here whole question but i am just putting related information with these calculations which will help you to explain properly.

Here it says

Question.

The CB needs six minutes of machine time to produce each book, whereas the TJ
needs 10 minutes per book. The machines cost $12 per hour to run.

As mentioned above there are three main overheads, the data for these are:
Overhead Annual cost for the coming year ($)
Property costs 2,160,000
Quality control 668,000
Production set up costs 52,000
–––––––––
Total 2,880,000
–––––––––

The CB will be inspected on 180 occasions next year, whereas the TJ will be inspected just
20 times. Jola Publishing will produce its annual output of 1,000,000 CBs in four production
runs and approximately 10,000 TJs per month in each of 12 production runs.

Solution.

Workings for overheads:
Total overhead $2,880,000
Total machine hours (1,000,000 × 6 mins) + (120,000 × 10 mins) = 7,200,000 mins
= 120,000 hours
Cost per hour = $2,880,000 ÷120,000
= $24 per hour

In calculating total machine hours above its 120,000 multiplied by 10. could you please tell me from where they got 120,000.

And it says above that Jola Publishing will produce its annual output of 1,000,000 CBs in four production runs and approximately 10,000 TJs per month in each of 12 production runs.

so how comes they got 20,000 in machine hours driver for TJ as its supposed to be 10,000.

The overheads have been split on the basis of the following activity levels:

Driver CB TJ

Property costs Machine hours 100,000 20,000
Quality control Inspections 180 20
Production set up Set ups 4 12
A cost per driver approach is also acceptable.

I do request you please explain me avobe calculations.

kind regards
Chowdhury

Dear Sir

Thank you for your quick response and yes i have watched your free lecture on activity based costing but when i do practice past question paper sometimes i find difficulty which is not understandable for me without asking you that’s why i come here for your help.

I am doing self study and i have no one to help me out except you Open tuition when i need to have some good explanation for some complex calculation of past question papers.

Therefore i do extremely request you, please help me out for my exam as i do self study and i am completely reliable on you for your help.

And I can’t help saying, You are so kind and nice. God will always bless you.

Kind Regards
Chowdhury

Thank you very much for being so kind to me, And you are so exceptional than others and doing great job as well. Wish if everyone would be like you here.

Kind Regards
Chowdhury