Accounting for Managers: Interpreting accounting information for decision-making

424 ACCOUNTING FOR MANAGERS

11.4
Cost pool Estimated Expected activity
cost Product A Product B Total Rate £/activity

Activity 1 £20, 000 100 400 500 40.00
Activity 2 £37, 000 800 200 1,000 37.00
Activity 3 £91, 200 800 3,000 3,800 24.00

Product A:

Total per unit (/8,000)

Activity 1: £40. 00 × 100 £4, 000 £0.50

Activity 2: £37. 00 × 800 £29, 600 £3.70

Activity 3: £24. 00 × 800 £19, 200 £2.40

£6.60

Product B:

Total per unit (/6,000)

Activity 1: £40. 00 × 400 £16, 000 £2.67

Activity 2: £37. 00 × 200 £7, 400 £1.23

Activity 3: £24. 00 × 3 , 000 £72, 000 £12.00

£15.90

11.5

(a) Set-up costs £66, 000
Production runs 12+ 5 + 8 = 25
Cost per set-up £66, 000 / 25 =£2, 640
Product A has 12 runs @ £2, 640 =£31, 680
And 4,000 units are produced
Cost per set-up per unit is £31, 680 / 4 , 000 =£7. 92
(b) Materials handling costs £45, 000
Stores orders 12+ 6 + 4 = 22
Cost per store order £45, 000 / 22 =£2, 045
Product B has 6 stores orders @ £2, 045 =£12, 270
And 3,000 units are produced
Cost per stores order per unit is £12, 270 / 3 , 000 =£4. 09

11.6
Purchasing cost £120, 000
No. purchase orders 240
Cost per purchase order £500
L uses 80 @ £500 £40, 000
For 20,000 units= £2 per unit
M uses 160 @ £500 £80, 000
For 20,000 units= £4 per unit