QUESTIONS 397
Product Hekla uses £100 of direct materials and £75 of direct labour. In addition,
each Hekla has been identified as using fivepurchase orders, eight stores issues
and two deliveries.
Calculate the total cost of each Hekla.11.8 Samuelson uses activity-based costing. The company manufactures two
products, X and Y. The annual production and sales of Product X are 3,000 units
and of Product Y 2,000 units. There are three activity cost pools, with estimated
total cost and expected activity as follows:Cost pool Estimated cost Expected activity
XYTotal
Activity 1 £12,000 300 500 800
Activity 2 £15,000 100 400 500
Activity 3 £32,000 400 1200 1600
Total costs £59,000a Calculate the overhead cost per unit of Product X and Y under activity-
based costing.
b Samuelson wishes to contrast its overhead allocation with that under the
traditional costing method it previously used. Samuelson charged its overheads
of £59,000 to products in proportion to machine hours. Each unit of X and Y
consumed five machine hours in production. Calculate the overhead cost per
unit of Product X and Y under the traditional method of overhead allocation.
11.9 Brixton Industries PLC makes three products: Widgets, Gadgets and Helios.
The following budget information relates to Brixton for next year (Table A1.4).
Overheads allocated and apportioned to production departments (including
service cost centres) were to be recovered in product costs as follows:Machining department at £1.20 per machine hour.
Assembly department at £0.825 per direct labour hour.However, you have determined that the overheads could be reanalysed into cost
pools as in Table A1.5.
You have also been provided with the following estimates for the period
(Table A1.6).Table A1.4 Brixton Industries budget information
Widgets Gadgets Helios
Sales and production (units) 50,000 40,000 30,000
Selling price (£ per unit) 45 95 73
Direct labour and materials (£ per unit) 32 84 65
Machine hours per unit in machining dept 2 5 4
Direct labour hours perunit in assembly dept 7 3 2