ACCA PM Past Papers: B1b. Calculating costs per driver and per unit

December 2014

3524 others answered this question

MC Question 18

A company manufactures two products, C and D, for which the following information is available:

	Product C	Product D	Total
Budgeted production (units)	1,000	4,000	5,000
Labour hours per unit/in total	8	10	48,000
Number of production runs required	13	15	28
Number of inspections during production	5	3	8

Total production set up costs	$140,000
Total inspection costs	$80,000
Other overhead costs	$96,000

Other overhead costs are absorbed on the basis of labour hours per unit.

Using activity-based costing, what is the budgeted overhead cost per unit of product D?

A. $43·84
B. $46·25
C. $131·00
D. $140·64

Reveal answer

December 2014 ^Specimen

3738 others answered this question

Question 3a

Brick by Brick (BBB) is a business which provides a range of building services to the public. Recently they have been asked to quote for garage conversions (GC) and extensions to properties (EX) and have found that they are winning fewer GC contracts than expected.

BBB has a policy to price all jobs at budgeted total cost plus 50%. Overheads are currently absorbed on a labour hour basis, resulting in a budgeted total cost of $11,000 for each GC and $20,500 for each EX. Consequently, the products are priced at $16,500 and $30,750 respectively.

The company is considering moving to an activity based cost approach. You are provided with the following data:

Overhead category	Annual overheads	Activity driver	Total number of activities per year
	$
Supervisors	90,000	Site visits	500
Planners	70,000	Planning documents	250
Property related	240,000	Labour hours	40,000
Total	400,000

A typical GC costs $3,500 in materials and takes 300 labour hours to complete. A GC requires only one site visit by a supervisor and needs only one planning document to be raised. The typical EX costs $8,000 in materials and takes 500 hours to complete. An EX requires six site visits and five planning documents. In all cases, labour is paid $15 per hour.

Required:
(a) Calculate the cost and the quoted price of a GC and an EX using activity based costing (ABC). (5 marks)

Reveal answer