Two products x and y are made using similar equipments and methods. The data for the last period are:
X Y
Units produced 6000 8000
Labor hours per unit 1 2
Machine hour per unit 4 2
Set-ups in period 15 45
Orders handled in the period 12 60
Overheads for the period pound
Relating to production set-ups 179000
Relating to order handling 30000
Relating to machine capacity 55000
Required:
Calculate the overheads to be absorbed per unit of each product based on;
a) Conventional absorption costing using a labor hour absorption rate. (5 marks)
b) An ABC approach using suitable cost drivers.( 5 marks)
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