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
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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