Cost per unit using Activity Based Costing method

Question

BOS Ltd. manufacturers of computer games, toys and software for kids. It produces two types of toys Speed car & Double speed car. The direct material costs amounts to Rs.20 for Speed car and Rs.40 for Double speed car. The firm pays Rs.18 per unit for each product for labour cost. Since, the demand for Speed car is on lower side, therefore, the form produces only 6000 units annually whereas the firm produces Double speed car which is 3times that of Speed car as the demand for Double speed car is more in the market. The total direct labour hours amounts to 24,000 in the ratio of 1:3 for Speed car and Double speed cars each game requires an hour of direct labour of manufacturing. The estimated is 30,000 hours and No, of inspections is 6,000. The expected cost drivers per product has been agreed by the management for Setting up machine in the ratio of 1:2, Machining in the ratio of 3:2 and inspection in the ratio of 3:2

manufacturing overhead cost on various activities of the company are Rs.60,000 for setting up of machines, Rs.30,000 for machinery and Rs.6,000 for inspection. The expected use of cost drivers per activity for No. of setups is 1200, for Machine

Question 1: What is the cost per unit for Speed car under Activity Based Costing?

a) Rs.42.45

b) Rs.43,58.

c) Rs.44.58

d) Rs.42.58

Question 2:- What is the cost per unit for Double speed car under Traditional Costing system?

a) Rs.63.

b) Rs.61

c) Rs.62

d) Rs.67

Question 3:- What is the cost per unit for Double speed car under Activity Based Costing?

a) Rs.61.14

b) Rs.67

c) Rs.54.34

d) Rs.64.89

Question 4: What is the predetermined overhead rate under Traditional Costing system?

a) Rs.4.55

b) Rs.5

c) Rs.5.67

d) Rs.4

Question 5:- What is the cost per unit for Speed car under Traditional Costing system?

a) Rs.42

b) Rs.43

c) Rs.42.50

d) Rs.43.45

Answer 1

WOW! What a thorough, thorough Management Accounting problem. Please note this is not a Finance or Financial Accounting problem. I would be happy to assist you with this or similar problems, if you're still around. It would likely take 1 hour. -Basil CPA