ACCA PM · Chapter 2 · Question 2 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. Using activity-based costing, what is the overhead cost per unit of product Y (to the nearest cent)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $196.67
Explanation
Set-up rate = $120,000 / 80 = $1,500; handling rate = $80,000 / 160 = $500; machining rate = $200,000 / 12,000 hours = $16.6667 per hour. Y overheads = (50 x $1,500) + (110 x $500) + (4,000 hours x $16.6667) = $75,000 + $55,000 + $66,667 = $196,667. Per unit = $196,667 / 1,000 = $196.67.
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