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Q1) Broomfield Company budgeted $8,000,000 of manufacturing overhead for current year, and 40,000 hours of direct labor (cost of $50/hour). Production of Product X (100,000 units) consumed $320,000 of direct materials, and 7,000 direct labour hours. 

a) If overhead is allocated on a basis of direct labour hours, find out unit cost of Product X.

b) Suppose instead that Broomfield uses ABC system, with three cost drivers: machine hours, materials handling, and setups. Of total overhead cost, 60% is in machine hour pool (30,000 budgeted hours), 25% is in materials pool (assigned based on $1,600,000 of total materials budgeted to be used), and 15% in setup pool (200 budgeted setups). Additionally to materials and labour given above, Product X used 5,500 machine hours and 57 setups. find out unit cost of Product X under ABC system. Describe briefly.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M917807

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