Activity based costing

dumutrobadumutroba 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?

Comments

  • dumutrobadumutroba AAT Student, AATQB Posts: 125
    edited June 11
    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

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