1.

The budgeted overheads and cost driver volumes of XYZ are as follows:

The company has produced a batch of 2,600 components of AX-15, its material cost was Rs. 1,30,000
and labor cost Rs. 2,45,000. The usage activities of the said batch are as follows. Material orders –
26, maintenance hours – 690, material movements – 18, inspection – 28, set ups – 25, machine
hours – 1,800

Calculate – cost driver rates that are used for tracing appropriate amount of overheads to the said
batch and ascertain the cost of batch of components using Activity Based Costing.

2. A company manufactures two products, X and Y. The product X is a low volume and its sales are
only Rs.5,000 p.a. Product Y is high volume and labor intensive, its sales are 25,000 units pa. Product
X takes 6 labor hours to make one unit but Y requires 8 hours per unit.
Details of costs for materials and labor for each product are as follows.

The company works 1,00,000 direct labor hours p.a. Total manufacturing overhead costs are
Rs.17,50,000 p.a.

B. Allocation of activities to X and Y:

X Y
Machine Set up 6000 5000
Quality inspection 10000 5000
Production order 200 400
Machine hours worked 12000 38000
Material receipts 300 12000
You are required to compute per unit cost of each product using,
I. Direct labor hour rate method for absorption of overhead costs and
II. Activity Based Costing technique for absorption of overhead costs

3.