Home For AAT student members AQ 2016 Professional Diploma in Accounting Management Accounting: Decisions and Control

Task 8 Moc2

Hi Everyone,

I was hoping someone could help me get my head around this task please?

Thanks so much in advance x





Comments

  • Pian32Pian32 MAAT Posts: 378
    Hi

    The task is testing ABC costing and comparing it to labour hours costing.

    In a) i) you're calculating the total allocated overheads based on the cost drivers provided. In ii) you're calculating the total overheads for each product on a labour hours basis.

    For b) you're looking at the differences between the methods and how they represent the costs. I won't go through this in the post.


    a)
    The best way to approach this is look at what you need before doing too much calculation.

    You need the total number of: material requisitions, production set ups and labour hours. If the question was more complex you might also want to jot down the total fixed cost.

    Material requisitions = 400+1200 = 1,600
    Set ups = 150+450 = 600
    Labour hours = 3*50000+2*25000 = 200,000
    Total Fixed cost = 600000+400000=1,000,000

    Now you have all the pieces to answer the question fully.

    i)
    Cost per material requisition = 400000/1600 = 250
    Cost per production set up = 600000/600 = 1,000

    Material Handling = Cost per requisition * number of requisitions.
    Rose = 400 * 250 = 100,000
    Thyme = 1200 * 250 = 300,000

    Production set up costs = Cost per set up * number of set ups
    Rose = 150 * 1000 = 150,000
    Thyme = 450 * 1000 = 450,000

    ii)
    Cost per labour hour = 1000000/200000 = £5

    Total costs by labour hour:
    Rose = 5*3*50000 = 750,000
    Thyme = 5*2*25000 = 250,000

    You are given a table which can help you check your results as well.

    Total fixed cost for product/units + Direct labour + Direct material = unit cost

    e.g Rose under ABC
    250000/50000 + 30 + 2.1 =37.1 as given
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  • JenniferHJenniferH Registered Posts: 2
    Amazing!! Thank you so much!!
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