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traditional method of overhead absorption

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › traditional method of overhead absorption

  • This topic has 3 replies, 2 voices, and was last updated 2 years ago by Avatarsooha.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • February 29, 2024 at 7:27 pm #701492
    Avatarsooha
    Participant

    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.

    February 29, 2024 at 7:33 pm #701493
    Avatarsooha
    Participant

    Oppps ,this is the answer of question 36, this miss numbering

    thank you

    February 29, 2024 at 7:46 pm #701494
    AvatarIAW3005
    Keymaster

    So you are okay?

    March 1, 2024 at 7:04 am #701518
    Avatarsooha
    Participant

    yes thank you^^

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