Citra bhd manufacturers two types of components, C1 and C2 andabsorbs overheads on the basis of direct labour hours. Anticipatedoverheads for the upcoming accounting period is RM 972500,information about the company products is as follows
C1
C2
Expected production volume (units)
3000
12000
Diect material costs
RM 32 PER UNIT
RM 40 PER UNIT
Direct labour /unit (rm 15/hour)
RM 30
RM 60
The overheads od citra bhd of RM 972500 can be identified withthree main activities as follows
Order processing
Rm 180000
Machine processing
Rm 650000
Product inspection
Rm 142500
These activities are driven by number of orders processed ,machine hours worked and insoection hours respectively. Datarelevant to these activities are as follows
C1
C2
Order processed
380
220
Machine hours worked
22000
28000
Inspection hours
3000
12000
Q1A â Assuming the use of direct labour hours to apply overheadsto production, compute the unit manufacturing costs of products C1and C2 if the expected manufacturing volume is attained
Q1B - compute the absorption rates that would be used for orderprocessing, machine processing and product inspection
Q1C â assuming the use of activity based costing compute theunit manufacturing costs of products C1 and C2 if the expectedmanufacturing volume is attained
Q1D â comparing the unit product costs calculated under the twocosts calculated under the two costing systems state which productis overcost and which product is undercost, and how much?Additionally calculate the amount of the cost distortion for eachproduct.
Citra bhd manufacturers two types of components, C1 and C2 andabsorbs overheads on the basis of direct labour hours. Anticipatedoverheads for the upcoming accounting period is RM 972500,information about the company products is as follows
C1 | C2 | |
Expected production volume (units) | 3000 | 12000 |
Diect material costs | RM 32 PER UNIT | RM 40 PER UNIT |
Direct labour /unit (rm 15/hour) | RM 30 | RM 60 |
The overheads od citra bhd of RM 972500 can be identified withthree main activities as follows
Order processing | Rm 180000 |
Machine processing | Rm 650000 |
Product inspection | Rm 142500 |
These activities are driven by number of orders processed ,machine hours worked and insoection hours respectively. Datarelevant to these activities are as follows
C1 | C2 | |
Order processed | 380 | 220 |
Machine hours worked | 22000 | 28000 |
Inspection hours | 3000 | 12000 |
Q1A â Assuming the use of direct labour hours to apply overheadsto production, compute the unit manufacturing costs of products C1and C2 if the expected manufacturing volume is attained
Q1B - compute the absorption rates that would be used for orderprocessing, machine processing and product inspection
Q1C â assuming the use of activity based costing compute theunit manufacturing costs of products C1 and C2 if the expectedmanufacturing volume is attained
Q1D â comparing the unit product costs calculated under the twocosts calculated under the two costing systems state which productis overcost and which product is undercost, and how much?Additionally calculate the amount of the cost distortion for eachproduct.
