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Sir ,
Set up cost total is give as $1400000
and below the cost driver mentioned are :
Production ( units ) Product A 50000 Product B 100000
Size of each production run Product A 500 Product B 2500how do i work this out in the overhead and working and find out the absorption rate ?
Thankyou
For product A, if the produce 500 in each run, then in total there must be 50,000/500 = 100 runs. Similarly for B there must be 100,000/2,500 = 40 runs.
So there are 140 runs in total and the cost per run is $1,400,000/140
You can then carry on in the same way as in the free lecture on ABC.
So in the working , for set up cost I write $10,000 for both Product A and Product B or do i have to multiply the 10,000 with something else ?
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