Activity Base Costing — OpenTuition Forums

Nnadir15y ago

F5 BPP Exam kits, See question number 2 Linacre Co, See the answers of this question. I am not understanding the working number 4 of section b.
Where 10 runs come from???
Why has it multiply by 900 units???
Where 10 annual cost come from???
For the Product test where does this $8000 annual cost come from????
I am not understanding for how he calculate the cost per unit for component supply and customer supply also????
PLEASE EXPLAIN IT TO ME IN A BIT MORE DETAIL???

One more Question for the part c, can I put the advantages of ABC and Disadvantages of ABC instead of the answer as in the book????

PLEASE REPLY

John MoffatTutor15y ago#1

1) In total the number of units to be produced of ZT3 are 9,000 (100 order of 60, plus 60 orders of 50). Since there are 900 units in each production run, it means that there are 9000/900 = 10 production runs

2) They have not multiplied by 900 units - they are simply saying that there are 10 runs of 900 units each time

3) The annual cost is not 10, it is 3500 (the 10 is part of the workings - the annual cost is 350 x 10 )

4) The answer shows the workings - 40 tests costing 200 each time comes to a total of 8000

5) for part (c) you cannot just put the advantages and disadvantages of ABC - the questions specifically asks why ABC may be preferred to traditional absorption costing. If you do not answer the question asked, you will not be given the marks.

Nnadir15y ago#2

Thanks a lot John.

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