N = [(Rs 157500 × 11000)/15000)]/3125 units = Rs 36.96 pu
Particulars
M
N
Direct Material per unit
300.00
450.00
Direct Labour
450.00
600.00
750.00
1050.00
Add
:
Budgeted overheads pu
Order Processing
49.00
28.00
Machine Processing
161.00
151.20
Product Inspection
16.80
226.80
36.96
216.16
Total Cost pu
976.80
1266.16
(iii)
Statement Showing difference in cost pu
Particulars
M
N
Total Cost p.u
(a) Under Activity Based Costing Metod
976.80
1266.16
(b) Under direct labour hour method
936.38
1298.50
Over Stated/Under Stated
(40.42)
32.34
(iv)
The absorption of overheads under activity based costing helps in ascertainment in production
cost incurred,since the apportionment of overheads relates the activities that bring out the
production. There will be least cost distortion if ABC method is usedinstead of
blanket absorption
rate ie. direct labour hour rate of overhead absorption.
Q. 3.
B Ltd manufactures two types of bags-L & T Both bags are produced on the same equipment and use
similar processes..The following budgeted data has been obtained for the year ended 31
st
December
2009.
Product
L
T
Production Quantity
25,000
2,500
Number of Purchase Orders
400
200
Number of Set ups
150
100
Resources required per unit
L
T
Direct Material (Rs)
25
62.5
Direct Labour (hours)
10
10
Machine Time (hours)
5
5
7
Group-IV : Paper-15 : Management Accounting -Enterprise Performance Management
DIRECTORATE OF STUDIES, THE INSTITUTE OF COST AND WORKS ACCOUNTANTS OF INDIA
Budgeted Production overheads for the year have been analyzed as follows :
Rs
Volume Related Overheads
2,75,000
Purchase Related Overheads
3,00,000
Set up Related Overheads
5,25,000
The budgeted wage rate is Rs 20/- per hour.
The cos present system is to absorb overheads by product units using rates per labour hour.
However, the company is considering implementing a system of activity based costing.An activity
baseinvestigation revealed that the cost drivers for the overhead costs are as follows
:
Volume Related Overhead
Machine Hours
Purchase Related Overhead
No of Purchase Orders
Set up related Overheads
No of Set ups
Calculate the unit cost for each type of bag using
(i)
The current absorption Costing method
(ii)
The proposed activity based costing approach
Compare your results and briefly comment on your findings.
Answer 3.
Product
L
T
Total
Production
Quantity
25,000
2,500
Direct Labour hours required
250,000
25,000
275000
Total Production Overhead
Rs 11,00,000
Overhead absorption rate per labour hour
Rs 4.00
Machine hours required
125,000
12,500
1,37,500
Total Puchase Order
400
200
600
Total Set ups
150
100
250
Cost per cost driver
Volume Related Overheads
Rs 2,75,000
Machine hours required
1,37,500
Volume related overheads/machine hour
Rs 2.00
Purchase related overhead
Rs 3,00,000
Total Purchase orders
600
Purchase related overheads/order
Rs 500
Set ups related overheads
Rs 5,25,000
Total Set ups
250
Set up related overheads
per set up
Rs 2100
8
Revisionary Test Paper (Revised Syllabus-2008)
DIRECTORATE OF STUDIES, THE INSTITUTE OF COST AND WORKS ACCOUNTANTS OF INDIA
(a)
(i) Unit cost using existing overhead absorption rate
Product
L
T
Rs
Rs
D. Material
25.00
62.50
D. Labour Cost
200.00
200.00
Overheads (10 lab hrs × Rs 4)
40.00
40.00
Total cost per unit
265.00
302.50
(a)
(ii) Unit costs using ABC
Product
L
T
Rs
Rs
D. Material
25.00
62.50
D. Labour Cost
200.00
200.00
Overheads :
Volume Related
(Rs 2 per machine hour)
10.00
10.00
You've reached the end of your free preview.
Want to read all 44 pages?
- Summer '17
- PROF. SHAH
- Management, rs, Revisionary Test Paper, Management Accounting -Enterprise Performance Management
