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Question :Writers company produces 2 products presently The information related to manufacturing is given below WRITERS'...

Question :Writers company produces 2 products presently

The information related to manufacturing is given below

WRITERS' Company

Yr 2018-19

Fountain Pen

Ball point

Units

10000

20000

Area occupied (sq feet)

7000

8000

Variable cost – Direct

32

25

Fixed Cost - Direct (per unit)

10

8

Rent - Fixed Cost per

month (Indirect - common for all products)

3,00,000.00

The Fixed indirect cost of Rent of Rs 3,00,000/- is to be allocated to both the products The company was doing this on the "number of units" basis till now

  1. Please compute cost per unit of each product basis the above method.

You have researched and advised Writers' Company to have Activity Based Costing and have gathered data to support the allocation of the Fixed indirect cost as follows :

Break-up of Indirect Fixed Costs                                                                                            Allocation basis

Rent

3,00,000

Area of

operations

b. Please compute cost per unit of each product on the new method of allocation

Writers' Company produces 2 products presently

The information related to manufacturing is given below.

WRITERS' Company

Yr 2018-19

Fountain Pen

Ball point

Units

10000

20000

Area occupied (sq feet)

7000

8000

Variable cost – Direct

32

25

Fixed Cost - Direct (per unit)

10

8

Rent - Fixed Cost per month (Indirect

- common for all products)

3,00,000.00
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