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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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
Transcribed Image Text:Question 2
Moon produces tow products the A and B. The direct costs of the two products are
given below:
Direct materials
Direct Labour
A
£4.00
£3.00
Materials handling
Production set up costs
The budgeted production for 80,000 units of A and 30,000 units of B.
The two main activities identified for the simple production process are material
handling and production set ups.
Product A requires large production runs and large transfers of materials from stores.
However, product B is a more complex product with a number of different types of
materials required and shorter and more frequent production runs.
A
Number Material Handling requisitions 100
Number of Production Set Ups
50
Required:
B
The budgeted fixed overheads of Caplan are £600,000 and they are made up as
follows:
£200,000
£400,000
£600,000
The use of these activities for each product is
£4.20
£2.20
B
400
200
Total
500
250
Calculate the unit cost of each product using the costing method of Activity Based
Costing.
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