Management Accounting Decision and Control Sample assessment 1 task 1.9 part B + C

LoopsterLoopster Registered Posts: 24
Hi,

I am a bit stuck on task 1.9 part B and C. I am fine with part A. If anybody could help I would be most grateful!

Herb Ltd manufactures 2 products, Rose and Thyme. The 2 overhead activities production set-ups and materials handling, have budgets of £600,000 and £400,000 respectively.
Rose and Thyme use 3 hours and 2 hours of labour per unit respectively.


....................................................Rose......................Thyme

Direct Materials - £ per unit.........2.10.......................3.33
Direct Labour - £ per unit.....,,,,......30..........................20
Number of material requisitions....400.......................1200
Number of production set-ups......150.........................50
Budgeted production units...........50000...................25000

a) Complete the table below using ABC Principles

Rose(£)......................Thyme(£)

Cost driver - Per material Requisition............250
Cost driver - Per production set - up............1000
Total Materials Handling..........................................100,000.....................300,000
Total production set-ups.........................................150,000......................450,00



I am fine with this part


b) Calculate the fixed overheads assuming they are absorbed on a labour hours basis

Answers (ROSE £750,000, THYME £250,000) I can't seem to work out how to get to these answers


c) Using information from (a) and (b) calculate the total cost per unit using ABC and the traditional method to two decimal places

......................................................Rose (£)...................Thyme(£)
Total Unit Cost - ABC.....................37.10.........................53.33
Total Unit Cost - Labour Hours......47.10..........................33.33

I can't seem to work out how to get to these answers either, probably because I can't do part B

Any help will be great!!

Thanks

Comments

  • N4TN4T AAT Student Posts: 191
    b) OAR = Total FC / Total Labour hrs

    Total FC = £600K + £400K = £1,000,000

    Total Labour hrs = 200,000 hrs
    Rose - 3hrs per unit x 50,000 units = 150,000hrs
    Thyme - 2 hrs per unit x 25,000 units = 50,000 hrs

    Fixed costs is absorbed at rate of £1,000,000 / 200,000 hrs = £5 per labour hr

    Fixed cost for Rose 150,000hrs x £5 = £750,000
    Fixed cost for Thyme 50,000hrs x £5 = £250,000

    c) I'll just show the workings for Rose

    ABC method

    VC 30.00 + 2.10 = £32.10
    FC £250K /50,000 units = £5.00
    Total unit cost = £37.10

    Traditional method
    VC £32.10
    FC £750K/50,000 units = £15
    Total unit cost = £47.10
    Loopster
  • LoopsterLoopster Registered Posts: 24
    N4T,

    Perfect! Thanks so much!!
  • Golebatax123Golebatax123 Registered Posts: 54
    Where can i find past papers for credit contro AQ2010? :'(
  • LoopsterLoopster Registered Posts: 24
    AQ2010? Why 2010?
  • Paulasw1Paulasw1 Registered Posts: 23
    hi, how did you figure out for a) cost driver per material requisition and production set up, also materials handling and total production set up/ Can anyone help !
  • IrrorateIrrorate Registered Posts: 140
    Cost drivers:
    Material - £400,000 (fixed ohd) / 1,500 (total requisitions)
    Set ups - £600,000 / 600 (total set ups)
    Then apportion them out - rose has 400 requisitions to Thyme's 1200 so ratio 1:3
    400,000 / 4 so Rose £100k thyme £300k. Then the same method for set ups.

    Hope this helps.
  • Nicola_Wilson1Nicola_Wilson1 Registered Posts: 5
    Good Morning, can someone please explain where the £250k comes from in N4T's example above? I have my exam later today and am really struggling to work this one out.

    Many Thanks
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