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Dear Sir,
Thanks for your reply,Reference to ABC question dtd 25/1/2016 that was the full question as per BPP IPass. Me too was confused & couldn’t solve it.This is there solution but didn’t know from where they derived the overhead costs. Is it because there question is incomplete. didn’t know $35000,$70000 & $165000 came from..I think it was suppose to be included in question right.
The correct answer is $37.64
Machine hrs (3000×2)+(2000×1)+(1500×2)=11000 (This part is ok )
Absorption rates:
Materials handling =$35000/$70000=50% of direct materials cost (didn’t understand from where they derived these figures)
Other Overheads =$(165000-35000)/11000 machine hrs=$11.82 per machine hr cost per unit of R (Didn’t understand)Direct materials $8
Direct Labour $2
Materials handling overhead (50% of 8)
Other overhead ($11.82 x 2 machine hrs)Thank You for your support always…
I do not have iPass and therefore can only assume that it is BPP’s mistake that they did not give those figures in the question. Without them it would be impossible,
Hi I would like to ask one thing in ABC method,
What if we are provided with the ‘revenue’ and ‘cost of products sold’ in items, how we have to tackle such situations?
For Example:-
Items Soft Drinks Fresh Produce Packaged food
Revenues 425,800 756,250 443,280
Cost of product sold 262,500 467,500 270,000
Cost of empty bottles returned 6,800 0 0
No. of purchase orders placed 315 285 210
No. of deliveries received 420 570 525
Hours of shelf stocking time 250 1,425 1,050
Number of product sold 63,000 285,000 105,000Activity Total Cost Cost-Allocation Basis
Bottle returns 6,800 Direct tracing to soft-drink line
Ordering 81,000 810 Purchases orders
Delivery 106,050 1,515 Deliveries
Shelf-stocking 55,875 2725 hours of shelf stocking time
Customer 135,900 453,000 items sold
SupportTotal 385,625
How we will calculate costing on traditional basis and ABC basis and also we have to calculate operating income and the operating income as percentage of revenues for each product line?
I am sorry, but this forum is not for you to expect answers to full questions – you must have an answer to the question in the same book in which you found the question (unless it is a test question in which case we are not here to answer test questions).
This forum is for people to ask about anything they do not understand from our lectures, or any specific problems that they have with the answers to questions.
If you take the time to watch our free lectures on ABC then you will see how to deal with this question.
Our lectures are a complete course for Paper F5 and cover everything needed to be able to pass the exam well.
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