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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › traditional method of overhead absorption
this is question 35 from kaplan revision kit
The ABC Company manufactures two products, product Alpha and Product Beta. Both are
produced in a very labour-intensive environment and use similar processes. Alpha and Beta
differ by volume. Beta is a high-volume product, while Alpha is a low-volume product.
Details of product inputs, outputs and the costs of activities are as follows:
Direct labour hours/unit Annual output (units) Number of purchase orders Number of set-ups
Alpha 5 1,200 75 40
Beta 5 12,000 85 60
–––– ––––
160 100
–––– ––––
Fixed overhead costs amount to a total of $420,000 and have been analysed as follows:
$
Volume-related 100,000
Purchasing related 145,000
Set-up related 175,000
Using a traditional method of overhead absorption based on labour hours, what is the
overhead cost per unit for each unit of product Alpha (to two decimal places)?
my questions is ? isn’t the requirement said Using a traditional Method ? why they use ABC to solve this question. am i missing something here?
35 $0.60
Cost driver = number of set-ups
Cost pool = $84,000
Total set-ups= 20 (for A) + 8 (for B) = 28
Rate =$84,000/28 = 5 $3,000 per set-up
Cost for B = $3,000 × 8 set-ups = $24,000
Per unit = $24,000/40,000 = $0.60.
Oppps ,this is the answer of question 36, this miss numbering
thank you
So you are okay?
yes thank you^^
