Total Cost Per Unit Using ABC/Absorption Costing

ggp25

Hi,

Is anyone able to help with the below as it’s really confusing me. I’ve searched my textbooks and can’t seem to find any similar questions with answers.

PeterC

It might help to treat this as two separate questions. Part (b) and the second line of part (c) looks like a typical absorption costing questions and you should be able to find these in most management accounting texts.

As you suggest, there aren't many examples of ABC because each company does it differently. For this reason, the examiner has to provide a lot of guidance in the question.

As the question confused you, I presume the handwritten answers are the "official" results. For part (a), ignore any mention of Activity Based Costing, and jargon (eg. "driver")

For example, part (a) starts off like this:

Cost per production set up £ 16,000 Cost of setups divided by total setups 240,000/(50 + 100)

Cost per requisition £ 1,000 Cost of material handling divided by total requisitions 360,000/(240 + 120)

and so on....

see also "Activity Based Costing" here, or p32 in "Accounting Information, A Manager's Guide" by Whitaker

ggp25

Thank you for sending the above @PeterC , apologies I should have been clearer as it was part C that I was unsure on

PeterC

For Eff:
ABC
Material £10
Labour £40
Set up £3.20 (from a)
Material handling £9.60 (from a)
Total £62.80

Absorption
Material £10
Labour £40
Overhead £20 (from b)
Total £70

I'm sure you can now do Gee