PORTMORE COMMUNITY COLLEGE

ASSOCIATES DEGREE COURSEWORK

SEMESTER III– AUGUST 2022

PROGRAMME: BUSINESS ADMINISTRATION

COURSE NAME: COST ACCOUNTING

CODE: ACCT2401

YEAR GROUP: TWO

DATE: July, 2022

TIME:

DURATION:

EXAMINATION TYPE: COURSEWORK 2

DUE DATE: AUGUST 1, 2022

INSTRUCTION: Answer all questions

Bert producers manufactures two types of computerized scoreboards, custom and standard.
Each scoreboard involves three manufacturing processes, cutting, assembly and packing. The
company uses an activity-based costing system to allocate its overhead cost to the
manufacturing process.
In using the activity-based cost system the company uses four overhead activities, production
setup, procurement, quality control and materials management, in each production
department.
An activity analysis of the overhead related to the cutting department revealed the following
estimated costs and activity bases for the four overhead activities.

Activity Cost
$
Production setup 32,400
Procurement 117,000
Quality control 131,250
Materials management 112,500
Total $393,150

The activity-based usage quantities for each product in the cutting department are as follows:
Setups Purchase order Inspections Component Units
Requisition
Custom 300 750 1,500 225 3,750
Standard 60 150 375 75 3,750
Total 360 900 1,875 300 7,500

Required:
a) Determine the cost driver rate for each activity. (6 marks)

Cost Driver Rate are as follows:

Production Setup = 32,400 = $90 / setup

360

Procurement =117,000 = $130/ Purchase Order

900

Quality Control = 131,250 = $70 / Inspections

1875

Material Management = 112,500 = $ 375 / Requisition

300
 b) Calculate the total overhead cost assigned to each product in the cutting department
using the rates computed in A. (12 marks)

Customs $ Standard $
Setup (27,000) (5400)
Purchase Order (97,500) (19,500
Inspections ( 105,000) (26,250)
Component Requisition (84,375) (28,125)
Total (Activity Base Costing) $ 313, 875 $ 79,275

Setups (300*90); (60*90)

Purchase Order (750*130); (150*130)
Inspections (1500*70); (375*70)
Component Requisition (225*375); (75*375)

c) Determine the unit activity (overhead) for each product in the cutting department.
(4 marks)

Ans = Customs
313,875 = $ 83.7 / OH activity for customs
3750

= Standard
79,275 = $ 21.14 / OH activity for standard

d) Distinguish between activity-based costing and traditional costing. (4 marks)

e) Outline the stages of the ABC process ( 4 marks)

Total 30 marks