Page 6 - PowerPoint Presentation
P. 6
ACTIVITY BASED COSTING
Suggested Solution:
(a) Traditional costing based on direct labour hours
Total direct labour hours:
Product A = 2 hours per unit x 550 units = 1 100 labour hours
Product B = 2 hours per unit x 110 units = 220 labour hours
Total direct labour hours = 1 100 + 220 = 1 320
Machine setup-related cost per labour hour = R42 000 / 1 320 = R31.82 per labour hour
Cost allocation:
Product A = R31.82 per hour x 1 100 hours = R35 000
Product B = R31.82 per hour x 220 hours = R7 000
Cost per unit:
Product A = R35 000 / 550 units = R63.64 per unit
Product B = R7 000 / 110 units = R63.64 per unit
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