Company XYZ has 6 standard products from stainless steel and brass.The company’s most popular product is Product XX.
The following are Product XX’s data for next year budget:
| Activity | Cost Driver | Cost driver volume/yr | Cost pool |
| Purchasing | Purchase orders | 1,500 | $75,000 |
| Setting | Batches produced | 2,800 | $112,000 |
|
Materials handling |
Materials movements |
8,000 |
$96,000 |
|
Inspection |
Batches produced |
2,800 |
$70,000 |
| Machining costs | Machine hours | 50,000 | $150,000 |
| Purchase orders | 25 |
| Output | 15,000 units |
| Production batch size | 100 units |
| Materials movements per batch | 6 |
| Machine hours per unit | 0.1 |
Required:
(a) Calculate the budgeted overhead costs using activity based costing principles
(b) Calculate the budgeted overhead costs using absorption costing (absorb overhead using machine hours)
(c) How can the company reduce the ABC for Product XX
FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four, Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.
Also author to another very popular free educational accounting cum finance blog: http://basiccollegeaccounting.com under the branding of College Accounting Coach.
[...] Refer to Accounting Test Question No.ABC2 [...]
[...] ABC 1 ABC2 [...]