2018 Due date: 5pm (Sydney time), April 10 2018
Submit via Turnitin on the BlackBoard site. Students should allow at least 60 mins to load up assignments as Turnitin will electronically cease accepting submissions at 5pm (AEST).
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Petral Ltd. Manufactures 2 products, W and Z using the same factory and facilities. Details provided below:
|Product line||Vol of production||Material (direct) cost per unit||Direct labour per unit||Machine time per unit||Labour cost per unit|
|W||600||$6||0.75 hour||0.5 hour||$4|
|Z||7100||$18||1.25 hours||1.75 hours||$10|
Production overhead is comprised of the following costs:
|Description of cost||Amount|
|Factory overhead related to machine activity||$42,725|
|Cost of handling materials||$11,725|
|Administration costs for spare parts||$12,725|
The firm uses a plant-wide overhead rate based on Machine hours of $5.97 per machine hour.
However, an investigation of the activities (in addition to machine hours) that drive costs at the product-line level revealed the following relationships:
|Product line||No. of set-ups||No. of times material was handled||No. of spare parts|
- Verify the firm’s plant-wide rate of $5.97 per machine hour. Show all relevant calculations. (2 marks)
- Compute all appropriate overhead rates using activity based costing. Round off all individual overhead rates to two decimal places. Show all relevant calculations. (2.8 marks)
- Apply (1) and (2) to 2 product lines: that is, calculate the amount of overhead that should be allocated to Product-lines W and Z under the plant-wide rate and ABC rates. Show all relevant calculations. (4.8 marks)
- Compare the overhead allocations to product lines W and Z. (14.4 marks)
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