80.2K

Verified Solution

Link Copied!

XYZ Ltd manufactures Model A, Model B, Model C and Model D. Details of the four products and relevant information are given below for one period: Model A Model B Model C Model D 300 100 30 20 Output (units) Costs per unit (/unit) Direct material Direct labour Machine hours per unit (hrs/unit) 50 30 20 60 50 5 20 30 4 70 20 4 The four products are produced in production runs of 10 units and the production overhead costs are absorbed on the basis of machine hours. The following breakdown of costs has been identified by the company: 13,240 Machine department costs () (rent, business rates, depreciation and supervision) Set-up costs () Stores receiving () Inspection / quality control () Material handling and dispatch () 2,250 4,200 1,350 1,800 The following cost drivers have been identified by managers at XYZ Ltd for allocating overhead costs: Cost Cost driver Set-up costs Number of production runs Stores receiving Requisitions raised Inspection / quality control Number of production runs Materials handling and dispatch Orders executed The number of requisitions raised on the stores was 21 for each product and the number of orders executed was 45, each order being for a batch of 10 of a product. (ii) Calculate the total cost for the total production output of each product line, using ABC. (19 marks)

Answer & Explanation Solved by verified expert

See Answer