Exercise (1) Nasir Company manufactures two products: tables and chairs. The management has a cost allocation problem and has asked you to investigate it. You find that manufacturing overhead is currently assigned to products based on No. of products. for your investigation, you have data from last year and manufacturing overhead was AED 5,000,000 based on production of 45,000 tables and 55,000 chairs. Direct labor and direct materials costs were as follows: Direct Materials Direct Labor Tables 1,250,400 1,000,000 Chairs 1,600,000 1,400,000 Total 2,850,000 2,400,000 Management has determined that overhead costs are caused by four cost drivers. These drivers and their costs for last year are as follows: Cost Driver Costs Assigned Cost Driver Tables Chairs machine hours 4,000 6,000 Assembling AED 2,000,000 Handling materials 640,000 production runs 300 500 Inspecting and Packing 1,450,000 DL hours 8,000 Shipping 910,000 No. of shipments 180 Total M.OH 5,000,000 12,000 220 Total 10,000 800 20,000 400 Required 1. How much overhead will be assigned to each product if the company uses the ABC costing system? What is the total cost per unit produced for each product?
Exercise (1) Nasir Company manufactures two products: tables and chairs. The management has a cost allocation problem and has asked you to investigate it. You find that manufacturing overhead is currently assigned to products based on No. of products. for your investigation, you have data from last year and manufacturing overhead was AED 5,000,000 based on production of 45,000 tables and 55,000 chairs. Direct labor and direct materials costs were as follows: Management has determined that overhead costs are caused by four cost drivers. These drivers and their costs for last year are as follows: Required 1. How much overhead will be assigned to each product if the company uses the ABC costing system? What is the total cost per unit produced for each product? 2. How much overhead will be assigned to each product if number of products is used to allocate overhead? What is the total cost per unit produced for each product
