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aircraft components marketing. The traditional costing has two direct cost
categories namely, direct materials and direct manufacturing labour and a
single indirect cost pool that is manufacturing overhead allocated on the
basis of direct labour hours. The indirect cost allocation rate would have
been Rs.115 per direct manufacturing labour hour.
The company has now decided to replace the single indirect cost pool with
five indirect cost pools, representing five activity areas each with its own
supervising and budget responsibility. The relevant data are as follows:
Activity Area
Material handling
Lathe Work
Milling
Grinding
Testing
Two representative jobs processed under the new system of the facility at the
most recent period had the following features:
Particulars
Direct Materials costs per
job
Direct Mfg labour costs
per job
Direct Mfg labour hours
per job
Parts per job
Turns per job
Machine hours per job
Units per job
Job No.101
Job No.102
Rs.9,700
Rs.59,900
750
11,250
25
375
500
20,000
150
10
2,000
60,000
1,050
200
You are required to compute the per unit manufacturing costs of each job
under:
a. Traditional Job Costing System
b. Activity Based Costing System