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Hello. Could you please explain the calculation in 40 question in PM KAPLAN revision book. For which purpose information regarding total labor costs (kUSD 360) was given? How should we find cost of unit by using ABC? The calculation illustrated in answer section of the corresponding book seemed a bit confusing to me.
Thank you in advance for your explanation.The labour costs were not relevant to the question
Often questions have information in them that you don’t use, it is meant as a distractor.
So how is it done under absorption?
It’s $156000/6000 units which is total units = $26ABC is about what drives overheads
So in this question it is obviously the number of deliveries
X has 5 deliveries (1000 units/size of 200)
Y has 5 and Z has 3 so that’s 13 in total.
It’s $156000/13 = $12000 per deliveryX has 5 deliveries * $12000 then divided by 1000 units = $60 so that’s an increase of $34
Y has 5 * $12000 div by 2000 = $30 so that’s an increase of $4
and Z has 3 * $12000 div by 3000. = $12 which is a decrease of $141). How could I differentiate when this kind information is needed to be used or not (I mean information regarding 360,000$ labour costs). Because when I tried to find total cost for calculation of absorption costing, I’ve summarized 360,000$+156,000$?
2). the rest of explanation is clear to me. thank you
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