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Plant 2 produces about one hundred products. Its largest selling product is product X and the least product is product Y. Relevant data is given thus:
Product X Product Y Total product
Unit produced per annum 20,000 4,000 200,000
Material cost per unit $3.00 $3.00
Direct labour per unit 10 mins 10 minsMachine Time per unit 2 hours 2 hours
Number of set-ups, P.A 36 4 200
Number of purchase orders 40 8 3,600
Number of time material handled 300 20 15,000
Direct labour cost/hour $7.50Overhead costs: $
Set up 300,000
Purchasing 200,000
Material handling 155,000
Machines 720,000
Total $1,375,000. Total machine hours are 750,000
You are required to calculate the unit cost using
(a) Traditional method
(b) ABC methodThere is absolutely no point in typing out a full question like this and expecting me to provide a full answer.
You must have an answer in the same book in which you found the question (unless you have been set it as homework, and we are not here to do your homework for you 🙂 ).
Assuming you have watched my free lecture on ABC, then say what it is in the answer that you do not understand and then I will help you.
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