Activity Based Question

jlambo21

Hello

If anyone can help me with the workings for this please ill be grateful.

Thank you

mergen

https://forums.aat.org.uk/Forum/discussion/447843/abc-costing#latest

With a little search, please see above

CornishPixie

Ok here's how I would answer this question = please let me know if I am right or wrong.

Do the basics first (note that they have reversed these in the table, putting materials first).
Cost driver per production set up is £2,000,000 / 250 (50 + 200) = £8,000
Cost driver per material requisition is £3,500,000 / 875 (175 + 700) = £4,000

Therefore, the total materials handling will be:
Alpha - £4,000 x 175 requisitions = £700,000
Delta - £4,000 x 700 requisitions = £2,800,000

Production set up will be:
Alpha - £8,000 x 50 set ups = £400,000
Delta - £8,000 x 200 set ups = £1,600,000

For b) you are told that it takes Alpha 2 labour hours to complete each unit and Delta uses 1 hour.
For Alpha it will be 2 x 87,500 = 175,000 hours
For Thyme it will be 1 x 100,000 = 100,000 hours
Total is 275,000 hours

Then, work out the hourly rate. So that would be £2,000,000 + £3,500,000 / 275,000 = £20 per hour

Therefore, for Alpha, the calculation will be 200,000 x £20 = £4,000,000
And for Delta, the calculation will be 1,600,000 x £20 = £32,000,000
Total = £36,000,000

CornishPixie

Spotted an error in my workings at the bottom of above, the 200,000 should be 400,000. Corrected below

Therefore, for Alpha, the calculation will be 400,000 x £20 = £8,000,000
And for Delta, the calculation will be 1,600,000 x £20 = £32,000,000
Total = £40,000,000

jlambo21

Thank you !!