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

Loopster

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

N4T

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

N4T,

Perfect! Thanks so much!!

Golebatax123

Where can i find past papers for credit contro AQ2010?

Loopster

AQ2010? Why 2010?

Paulasw1

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 !

Irrorate

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_Wilson1

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