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Part 5 Overhead costs (15 marks) A company produces two products in one department....

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Accounting

Part 5 Overhead costs (15 marks)

A company produces two products in one department. Forecast data concerning the products for the next accounting period are shown as following tables.

Product X

Product Y

Forecast output (units)

100

300

Machine hours per unit

1

3

Number of customer orders

30

70

Number of quality control inspections

20

30

Cost pools

Cost amount ($)

Cost driver

Machine operating

10,000

Machine hours

Order processing

2,000

Number of customer orders

Quality control

1,000

Number of quality control inspections

Required:

Calculate the overhead cost to be absorbed by each of the products, using an activity-based method (using the relevant cost drivers to trace overhead costs to the individual products).

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