A B C

Production and Sales Volume (units) 15000 12000 18000

SP per unit 7.5 12 13
Raw material usage (kg) per unit 2 3 4
DL hours per unit 0.1 0.15 0.2
Machine hours per unit 0.5 0.7 0.9
No of production runs per annum 16 12 8
No of purchase orders per annum 24 28 42
No of deliveries to retailers per annum 48 30 62
Machine hours 7500 8400 16200

RM 1.2 per kg
DL for whole workforce 14.8 per hour

Overhead cost
Machine setup costs 26550
Machine running costs 66400
Procurement costs 48000
Delivery costs 54320
195270
ABC

Particulars A B C
Cost of RM 2.4 3.6 4.8
DL 1.48 2.22 2.96
Overheads 3.879555856 4.3469644395838 4.717393826915
Cost per unit 7.76 10.17 12.48

15.64% 1.01% -7.02%

QUESTION 2 Activity Driver

Overhead Category Annual O/h Site visits
Supervisors 90000 Planning documents
Planners 70000 Labour hours
Property related 240000
400000 Labour per hour
Total labour cost
GC EX
DM 3500 DM
DL 300 hours DL
Site visit 1 Site visit
Planning document 1 Planning document

Traditional GC EX
DM 3500 8000
DL 4500 7500
Overheads 3000 5000
Cost 11000 20500
Quoted Price 16500 30750

Question 3
Particulars CB TJ
Paper 0.8 0.1
Ink 1.5 4.5
Machine cost 1.2 2
Overhead 2.4 4
5.9 10.6
Sales Price 9.3 14
Margin 3.4 3.4

ABC Method
Particulars CB TJ
Paper 0.8 0.1
Ink 1.5 4.5
Machine cost 1.2 2
Overhead 2.4142 3.8816666666667
5.91 10.48
Sales Price 9.3 14
Margin 3.39 3.52

Question 4
Labour hours Machine hours Materials cost per unit
Product D 1/2 1 and 1/2 20
Product C 1 and 1/2 1 12
Product P 1 3 25

Total production overhead 654500

(%) Amount
Cost relating to setup 35 229075
Cost relating to machinery 20 130900
Cost relating to materials handling 15 98175
Cost relating to inspection 30 196350
TOTAL 100 654500 28
 No of Setups No of movements of material
Product D 75 12
Product C 115 21
Product P 480 87
TOTAL 670 120

TRADITIONAL
PARTICULARS D C P
DM 20 12 25
DL 3 9 6
Overhead per unit 42 28 84
65 49 115

PARTICULARS D C P
DM 20 12 25
DL 3 9 6
Overhead per unit 94.950298507 79.073974626866 69.206401119403
117.95029851 100.07397462687 100.206401119403

Diff 52.950298507 51.073974626866 -14.793598880597

Percentage 81.46% 104.23% -12.86%
dollars

0.45
2.1
36
94
140
32100 (Not given in Question)

(FV-IV)/IV
FV=ABC
IV=Traditional\

Total no of activities per year

500
250
40000

15 dollars
600000 Rate 10
 8000
500 hours
6
5

ABC GC EX
DM 3500 8000
DL 4500 7500
Overheads 2260 5480
Cost 10260 20980
Quoted Price 15390 31470

CB 6 mins
TJ 10 mins
Production of CB 1000000
Production of TJ 120000
6000000 100000
1200000 20000
7200000
Total Machine hours 120000
Overhead rate 24

Production units Machinery hours

750 1125
1250 1250
7000 21000
23375

Direct labour costs $6 per hour and production overheads are absorbed on a machine hour basis. The overhead absorption ra
per machine hour.
 estimated o/h
No of inspections 229075
150 130900
180 98175
670 196350
1000
Particulars
Cost relating to setup
Cost relating to machinery
Cost relating to materials handling
Cost relating to inspection
Total overhead
Overhead per unit
Traditional
A B C
Cost of RM 2.4 3.6 4.8
DL 1.48 2.22 2.96
Direct overheads 2.83 4.245 5.66
Total cost per unit 6.71 10.065 13.42

A B C
Production and Sales Volume (units) 15000 12000 18000
DL hours per unit 0.1 0.15 0.2
Total labour hours 1500 1800 3600 6900

Rate as per apportionment 28.3

overhead costs Total Quantity of CAB Rate

Machine set up costs 26550 36 737.5
Machine running costs 66400 32100 2.068536
Procurement costs 48000 94 510.6383
Delivery costs 54320 140 388

Overhead allocation A B C
Machine set up costs 11800 8850 5900
Machine running costs 15514.01869 17375.7009345794 33510.28
Procurement costs 12255.31915 14297.8723404255 21446.81
Delivery costs 18624 11640 24056
Total overheads 58193.33784 52163.573275005 84913.09
Overheads per unit 3.879555856 4.34696443958375 4.717394

Total Cost driver Rate

Supervisors 90000 500 180
Planners 70000 250 280
Property related 240000 40000 6
 Overhead Allocation GC EX
Supervisors 180 1080
Planners 280 1400
Property related 1800 3000
Total overheads 2260 5480

Total Cost Driver Rate

Property costs 2160000 120000 18
Quality control 668000 200 3340
Production set up costs 52000 16 3250
2880000

Allocation CB TJ
Property costs 1800000 360000
Quality control 601200 66800
Production set up costs 13000 39000
Total O/H 2414200 465800
O/H per unit 2.4142 3.88166666666667

s. The overhead absorption rate for the period is $28

Cost allocation base Qty of CAB Activity based o/h rates
No of setups 670 341.902985074627
Machinery hours 23375 5.6
No of movemments of material 120 818.125
No of inspections 1000 196.35

D C P
25642.723880597 39318.84328 164113.432835821
6300 7000 117600
9817.5 17180.625 71176.875
29452.5 35343 131554.5
71212.723880597 98842.46828 484444.807835821
94.9502985074627 79.07397463 69.206401119403
 . The fixed costs at Company X are $1 million annually. The main product has revenue of $8.90 per unit and $4.50 variable
quantity per year, and (b) Annual profit if 200000 units are sold.
FC 1000000 Cost 1900000
SP 8.9 Revenue 1780000
VC 4.5 Loss -120000

C 4.4
PV Ratio 0.4943820225

BEP in amount 2022727.2727

BEP in units 227272.72727

Steel Concrete Brick

First cost ( per ft) 72 76 81
Annual Maintenance ($) 14000 9000 6000
Annual heating cost (ft^2) 3 3.4 3.9
Salvage value 57.6 76 89.1
Life 20 20 20

. Machine A has a fixed cost of $40000 per year and a variable cost of $60 per unit. Machine B has an unknown fixed cost, but
two machines break even at a production rate of 2000 unit
PARTICULARS MACHINE1 MACHINE2
FC 40000 X Variable cost of the whole
VC 60 10
Breakeven 2000 2000
40000+(60*2000)
X 140000 160000
X

. Two types of pumps are available. Pump X costs $800 and has a life of 3 years. It also requires rebuilding after 2000 operatin
hours of operation at a cost of $700. If the operating cost of each pump is $1 per hour, how many hours per

Particulars Pump X Pump Y

Pump cost 800 1900
Life 3 5
Operating cost of each pump is $1 per hr

A defense contractor has been able to summarize its total annual fixed costs as $100,000 and the total variable cost per un
government this year what should the per unit selling price be to make a %25 profit this year? (b) If foreign sales of 3000 unit
profit is acceptable for this contractor again, what could be the new

FC 100000
VC 33

a) Units 5000 Sales volume to earn desired profi

Cost 265000

Let cost be 100x

Let revenue 125x

100x = 364000
x = 3640
125x = 455000
SP per unit = 56.875

Sales price 12.5 per unit

Equipement cost 200000 dollars
Overhead cost 50000 per year
Operating and maintenance cost 25 per operating hour
Production time 0.1 hours per unit
Planning period 5 years
MARR 15%

Cost
90 per unit and $4.50 variable cost. (a) Determine the breakeven
000 units are sold.

as an unknown fixed cost, but with this process 200 units can be produced each month at a total variable cost of $2000. If the total costs o
a production rate of 2000 units per year, what is the fixed cost of machine B?

e cost of the whole 2000

units 200

= X+(10*2000)
= 20000 + X
= 140000

rebuilding after 2000 operating hours at a cost of $300. Pump Y costs $1900 and is expected to last 5 years. It also requires overhaul after
er hour, how many hours per year must the pump be required to justify the purchase of pump Y? (Interest rate = 10% per year)

the total variable cost per unit of production as $33. (a) If only 5000 units is all that is expected to sell to the
b) If foreign sales of 3000 units per year is to be added to the 5000 units government contract above and a %25
r again, what could be the new selling price per unit?
s volume to earn desired profit = (TFC+Desired profit)/ C per unit

100x = 265000
x = 2650
125x = 331250
SP per unit 66.25
f $2000. If the total costs of the

so requires overhaul after 8000

= 10% per year)
Variable production overheads are recovered at the rate of Rs.8 per direct labour hour. Other costs incurred by the company
Fixed administration overheads 80,000 The selling and distribution overheads include a variable element due to a d

DM- 4kg@Rs 3/kg 12

DL- 5hrs@Rs 7/hr 35
FC 1200000
Selling and distrubtion o/h 80000 20000 Varying 60000 FC
SP 129

DM 12
DL
curred by the company are: Rs. Factory fixed overheads 120,000 Selling and distribution overheads 160,000
able element due to a distribution cost of Rs.2 per unit. The fixed selling price of the unit is Rs.129.