- Question 5 Zfc Ltd Produce Three Products And Currently Use Traditional Absorption Costing However They Are Hoping To 1 (134.34 KiB) Viewed 17 times
Question 5 ZFC Ltd produce three products and currently use traditional absorption costing. However, they are hoping to transition towards a more refined costing technique, such as activity- based costing ABC). They have asked their cost accountant, Emmanuel Shimon, to review their current approach and advise on the proposed introduction of ABC. The following data has been made available to Emmanuel Shimon. Product A Product B Product C Production (units) 30,000 35,000 2,500 Sales price (per unit) $30 $30 $30 Material cost (per unit) $10 $15 $15 Labour hours (per unit) 1.5 hours 1 hour 1 hour (Labour is paid at the rate of $8 per hour) Overheads for the period were as follows: Set-up costs 115,000 Receiving 40,000 Despatch 20,000 Machining 45,000 220,000 Cost driver data: A B C Machine hours per unit 2 2 2 Number of set-ups 12 10 3 Number of deliveries received 10 10 2 Number of orders despatched 20 20 20 Required a) Calculate the cost (and hence profit) per unit for all 3 products, absorbing all the overheads based on labour hours. (6 marks) b) Calculate the cost (and hence profit) per unit for all 3 products, absorbing the overheads using an Activity Based Costing approach. (8 marks) c) Discuss advantages and disadvantages of activity Based Costing. (6 marks) ||