- December 16, 2021 at 2:21 pm #644411Natasha1996Member
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- Replies: 22
There is an ABC MCQ on your website which says that:
Open Ltd produces two products X and Y.
The monthly production is 20,000 units of X and 50,000 units of Y.
Product X is produced in batches of 1000 units each time.
Product Y is produced in batches of 5000 units each time.
The total set-up cost is $30,000 each month and Open Ltd uses ABC with the number of production runs as the cost driver.
Since we are told that setup cost has the number of production runs as the cost driver. BUT to calculate the production runs we need to divide total production units by the batch size.
Production runs = (20000 / 1000) + (50000 / 5000) = 30
This is exactly the same thing I asked you in another thread about the number of batches which is calculated in the same way.
So we assume that number of batches and production runs mean one and the same thing?December 16, 2021 at 4:09 pm #644424John MoffatKeymaster
- Topics: 56
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See my reply to your other question. They will need a production run for each batch that they make. The words do not mean the same, but the total number of production runs will equal the total number of batches.
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