Mock Exam wc 30th Nov 2015

Solution 2a) production cost per unit (conventional method)

Product A
Direct labour at 6 per hour
Direct materials
Production overhead at 28 per m/c hour

()
9
12
28
49

Product B

(1hrs)

()
6
25
84
115

(3 hr)

Mock Exam 30th November 2015

Solution2b)
the total production overhead is derived from the overheads allocated to the product in part a):

Product A
Product B
Total Production Overhead

()
35 000
588 000
623 000

(1250 X 28)
(7000 X 84)

Overhead costs traced to cost pools:

Set-up cost
Machining
Materials handling
Inspection

218 050
124 600
93 450
186 900
623 000

35.00%
20.00%
15.00%
30.00%

Costs driver rates:

()
Cost set-up cost
Cost per machine hour
Cost per material movement
Cost per inspection
Note:
*Machine hours = (1250x 1) + (7000 X 3) = 22 250

332.901 (218050/655)
5.600 (124600/22250*)
753.629 (93450/124)
203.152 (186900/920)

(Volume of units x m/c hrs per unit)

Overhead cost assigned to each product:

Set-up cost at 332.901

Machining at 5.600 per machine hour
Materials handling at 753.629 per movement
Inspection at 203.152 per inspection

Number of units
Overheads cost per unit

Product A
()
41 613 (125)
7 000 (1250)
18 087(24)
40 630 (200)
107 330
1250
86

Product B
()
176 438 (530)
117 600 (21000)

75 363 (100)
146 269 (720)
515 670

7000
74