# Activity based costing

dumutroba
AAT Student, AATQB Posts:

**125**
Hi there

I was wondering if somebody could help me with the calculation on the following

A manufacturing company is making Product A and Product B in batches of 250 and 500

Total amount of units produced were 25,000 and 10,0000

Every time a a batch is made the equipment need setting up

Product A requires 1 set up per batch, and B - 4 set ups

The total budget allocated for equipment set up is 200,000

Using ABC method what is

A)the cost of machine service per product?

B)the cost of machine service per batch?

I was wondering if somebody could help me with the calculation on the following

A manufacturing company is making Product A and Product B in batches of 250 and 500

Total amount of units produced were 25,000 and 10,0000

Every time a a batch is made the equipment need setting up

Product A requires 1 set up per batch, and B - 4 set ups

The total budget allocated for equipment set up is 200,000

Using ABC method what is

A)the cost of machine service per product?

B)the cost of machine service per batch?

## Comments

125cost driver ( number of set ups) rate = 200000/5 = 40000

number of set ups:

Product A 25000/250=100 100 batches x 1 set up=100 set ups

Product B 10000/500=20 20 batches x 4 set ups=80 set ups

A)OAR=200000/5=40000

Product A 1x40000=£40000

Product B 4x40000=£160000

so cost per unit must be

Pr A 40000/25000=£1.60

Pr B 160000/10000=£16

and cost per batch

B)Product A 40000/100=£400

Product B 160000/20=£8000