Osbourne pratice exam - Activity Based Costing

jodyewhite

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

mergen

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

jodyewhite

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

mergen

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.

jodyewhite

Many Thanks for your help with this subject.

mergen

You are welcome

jmh

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