Activity Based System Question No 4 (with answer)
| Question:
1(a) For below table, please fill up the following values (i) Overhead per cost driver unit (ii) Total Overhead per product per activity (iii) Cost per item
Question 1(b): What is a cost driver unit, what do you understand by the term “cost driver unit”. Give an example for each activity listed in the above table. SUGGESTED SOLUTION: Part 1(a) is a simple illustration to identify all of the steps necessary to do the numerical part of an ABC question.
Answer 1(b) A cost driver is “an activity which generates cost”, such as number of quality inspections, or number of deliveries. The cost driver unit, therefore is one inspection, one delivery and so forth. Hours or weight may be cost driver units, depending upon the cost driver in question Examples for each of the activities in the table are as follows: Activity Possible cost driver unit Machinery set-ups Number of set-ups Material handling Kilograms of material handled Quality control Inspection hour Supervision Number of work teams Maintenance Maintenance staff hours |
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December 4, 2009
Tags: Activity based costing questions, Activity based costing questions and answers
Posted in: Activity-Based Costing
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