# Activity based costing

AAT Student, AATQB Posts: 264
edited June 2018
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?
AAT Level 2. 2018 Distinction
AAT Level 3. 2018 Distinction
AAT Level 4. 2019 FSLC 100% MABU 93% MADC 82% PDSY 80%

• AAT Student, AATQB Posts: 264
edited June 2018
I have got the the following conclusions, but I will glad someone to confirm them for me

cost 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

AAT Level 2. 2018 Distinction
AAT Level 3. 2018 Distinction
AAT Level 4. 2019 FSLC 100% MABU 93% MADC 82% PDSY 80%