Osbourne books chapter 6

oljga

Dear fellow students, please help with the question as i hit a brick wall and can not get it for a couple of days...

CeeDee LTD makes two products, Cee and Dee. See is made in batches of 10,000 and Dee in batches of 1,000. Each batch has the following set-up and quality costs
set-up £250
quality £150
Each week the company produces 50,000 units of Dee and 50,000 units of Dee. company charges overheads to output on the basis of labour hours, which are 500 hr per week for Dee and 500 hr for Dee.
1. Calculate the overheads charged to See and Dee each week based on labour hours
2. Calculate the overheads charged to See and Dee using activity based costing and the cost drivers of set up and quality

Pian32

1. So labour hours are evenly split between the 2 products meaning the overheads charged will be equal overall (per unit will be less for Cee)

Total cost is 250*5+250*50+150*5+150*50 = £22,000 so on labour hours Cee and Dee each have £11,000

2
For activity based they'll get a proportion based on the amount of the driver type used.

So for set up Cee will get 5/55 and Dee 50/55.
Cee = 1250
Dee =12500

For quality the ratio is the same.
Cee =5/55 * 8250 = 750
Dee =50/55 * 8250 = 7500

Therefore totals
Cee= 1250+750 = £2,000
Dee = 12500+7500 =£20,000

Hope this help.

oljga

Great, can't thank you enough !!!