Activity-Based Costing, Cost Heirarchy (Cost Accounting)

honeyforeverkoh · #1 Jul 15, 2008, 08:35 PM

im currently studying for my exam and i can't answer this, please help me.

company prices product & budgeted cost,includ. allocated OH, plus a markup of 30%
2007 budget:MOH of $3.6 million,DirectLabour $720000, Purchases&UseOfMaterials $7.2 million

DirectMaterials(product X:$5.04)(product Y:$3.84)
DirectLabour(X:$0.36)(Y:$0.36)

controller's approach:
ACTIVITY - COST ALLOCATION - BUDGETED ACTIVITY- BUDGETED COST
Purchasing - PurchaseOrder - 1158 - $694800
Mat.Handl. - Setups - 1800 - $864000
QualityControl - Batches - 600 - $172800
Roasting - Roasting-hr - 96100 - $1153200
Blending - Blending-hr - 33600 - $403200
Packaging - Packaging-hr - 26000 - $312000

ExpectedSales(X: 100000kg)(Y: 2000kg)
BatchSize(X: 10000kg)(Y: 500kg)
Setups(X: 3 per batch)(Y: 3 per batch)
PurchaseOrderSize(X: 25000kg)(Y: 500kg)
Roasting(X:1hr/100kg)(Y:1 hr/100kg)
Blending(X:0.5hr/100 kg)(Y:0.5hr/100 kg)
Packaging(X:0.1hr/100 kg)(Y:0.1hr/100 kg)

b. use controller's activity approach to estimate the 2007 budgeted cost 1 kg of X and Y (allocate all cost to the 100000kg of X and the 2000kg of Y)

i have answered part a,c, and d questions but i can't understand part b. i was thinking of dividing budgeted cost by the budgeted activity so it will be like:
$694800/1158 = $600
the thing is, i don't know what should i do witht this number?!?



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