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  • ABC Q3 Solution

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    Urooj Mustafa
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    The document compares absorption costing and activity-based costing methods for allocating overhead costs across two courses, auditing and taxation. Under absorption costing, the total overhead cost is allocated equally on a per-day basis, resulting in total costs per course of $1,606.58 for auditing and $2,409.87 for taxation. In contrast, activity-based costing identifies specific cost drivers like center hire, enquiries, and brochures. It then allocates costs to each course based on their utilization of each activity, leading to total costs of $1,995.40 for auditing and $1,761.85 for taxation.

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    ABC Q3 solution

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    The document compares absorption costing and activity-based costing methods for allocating overhead costs across two courses, auditing and taxation. Under absorption costing, the total overhead cost is allocated equally on a per-day basis, resulting in total costs per course of $1,606.58 for auditing and $2,409.87 for taxation. In contrast, activity-based costing identifies specific cost drivers like center hire, enquiries, and brochures. It then allocates costs to each course based on their utilization of each activity, leading to total costs of $1,995.40 for auditing and $1,761.85 for taxation.

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    © All Rights Reserved
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    7 views2 pages

    ABC Q3 Solution

    Uploaded by

    Urooj Mustafa
    The document compares absorption costing and activity-based costing methods for allocating overhead costs across two courses, auditing and taxation. Under absorption costing, the total overhead cost is allocated equally on a per-day basis, resulting in total costs per course of $1,606.58 for auditing and $2,409.87 for taxation. In contrast, activity-based costing identifies specific cost drivers like center hire, enquiries, and brochures. It then allocates costs to each course based on their utilization of each activity, leading to total costs of $1,995.40 for auditing and $1,761.85 for taxation.

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    © All Rights Reserved
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    of 2

    a) using Absoprtion Costing

    No. of
    Duration Total
    Courses
    Auditing 50 2 100
    Taxation 30 3 90
    190

    Total Overhead Cost $152,625

    Overhead Cost per Course


    $803.29
    Per day

    Auditing
    Each course
    2 days
    duration is
    Total cost per
    $1,606.58
    course

    Taxation
    Each course
    3 Days
    duration is
    Total cost per
    $2,409.87
    course

    b) Using ABC

    Cost Driver
    Centre Hire Enquiries Brochures
    No. of No. of No. of
    Courses Enquiries Brochures

    Cost Rate per Activity

    Centre Hire Enquiries Brochures


    62500 27125 63000
    190 10850 21000
    328.95 2.50 3.00
    Overhead Cost Allocation to Course

    Auditing
    Acitivity utilized by each course
    Course
    Enquiries Brochure
    Duration
    2 days 175 300

    Cost Allocated 657.90 437.50 900.00

    Total 1995.40

    Taxation
    Acitivity utilized by each course
    Course
    Enquiries Brochure
    Duration
    3 days 70 200

    Cost Allocated 986.85 175.00 600.00

    Total 1761.85

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