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# Osbourne pratice exam - Activity Based Costing

Hi Anyone
I am struggling to remember how to work out ABC and how they come to the answer. I have enclosed the question.

Many Thanks

• Lets see if i can answer it. Do you have the answers to check?

First you need to calculate the OAR, which is 5.5mil/275000= £20

a) Cost driver per m.r is 3.5million/875=4000
Cost driver per set-up is 2million/250=8000
Total material handling cost, Alpha - £700,000.00 and Delta - £2,800,000.00 which adds upto 3.5mil
Totalprod set-up cost, Alpha - £400,000.00 and £1,600,000.00 which adds upto 2mil

b) Budgeted labour hours = 275000 (2x87500+1x100000)
Total Over head Absorbed, Alpha - £3,500,000.00 (20x2x87500) and Delta - £2,000,000.00

c) ABC, Alpha - £49 & Delta - £69
Absorption costing, Alpha - £76 & Delta - £45

Hope thats right.... haha
• Hi Mergen

Many Thanks that's the right answers.
b) Alpha has £40 and Delta £20 overheads per unit, how do they come to this.
c) How do you come to the answer.

Many Thanks
JO
• b) Alpha - £40 = 3.5mil/87500. Delta - £20 = 2mil/100000

c) ABC Alpha 1,100,000.00/87500=13 then plus 6+30 = 49
Absorption costing Alpha 6+30+40(3.5mil/87500)=76. Absorption includes fixed costs.
• Many Thanks for your help with this subject.
• You are welcome • hello, can you please explain how do you know that Alpha is 3.5mil and Delta is 2,0mil when calculating the overheads per unit? i know this is probably silly question and very obvious but would really appreciate help.

thank you