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Management Accounting Question ABC No2 On Activity Based Costing
Published by slang November 23rd, 2007 in Activity-Based CostingCompany 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:
(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
[Refer Answer]
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