Answer Happy

ACTIVITY BASED COSTING 1. Triple Limited makes three types of gold watch the Diva (D), the Classic (C) and the Poser (P). A traditional product costing system is used at present; although an activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Product D Product C Product P Costs relating to set-ups Costs relating to machinery Costs relating to materials handling Costs relating to inspection Total production overhead Labour hours Product D Product C Product P Hours per unit /h 1½ 1 Number of Set ups 75 115 480 670 Total production overheads are $654,500 and further analysis shows that the total production overheads can be divided as follows: **828|2| 100 Machine hours The following total activity volumes are associated with each product line for the period as a whole: Number of inspections 150 1½ 1 3 Number of movements of materials 12 21 87 120 Materials Cost per unit ($) 20 12 25 180 670 1,000 Production Units 750 1,250 7,000 Direct labour costs $6 per hour and production overheads are absorbed on a machine hour basis. The overhead absorption rate for the period is $28 per machine hour.