ACCA PM · Chapter 2 · Question 3 of 9
Delta Co makes two products, X and Y. Budgeted overheads are: machine set-ups $120,000; materials handling $80,000; machining $200,000. Product X: 4,000 units, 2 machine hours per unit, 30 set-ups, 50 material movements. Product Y: 1,000 units, 4 machine hours per unit, 50 set-ups, 110 material movements. If Delta Co instead absorbed all overheads using a single factory-wide machine-hour rate, what would be the overhead cost per unit of product Y (to the nearest cent)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $133.33
Explanation
Total machine hours = (4,000 x 2) + (1,000 x 4) = 12,000. Overhead absorption rate = $400,000 / 12,000 = $33.3333 per machine hour. Overhead per unit of Y = 4 x $33.3333 = $133.33.
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