ABC limited produces three products at Kariobangi light industries in Nairobi. The following information provide details of the costs, volume and transaction cost drivers for year 2020. Particulars A B C Number of units produced 90,000 30,000 15,000 Direct material (Ksh) 30,000 40,000 15,000 Direct labour (Ksh) 20,000 30,000 10,000 Machine hours per unit (hours) 5 3 7.5 Direct labour hours per unit (hours) 2.5 3 1.5 Number of production setups 5 10 50 Number of packaged deliveries 18 7 50 Number of stores receipts 50 70 700 Number of Engineering orders 45 25 60 The overhead costs are currently absorbed by using a direct labour hour rate and the total of the production overhead for the period has been analysed as follows: Particulars Amount (Ksh) Machining costs 1,000,000 Setup costs 75,000 Stores receiving costs 900,000 Packaging costs 650,000 Engineering costs 750,000 Total 3,375,000 Required An analysis of total costs for each product if all overhead costs are absorbed on a direct labour hour basis Using appropriate cost drivers present an analysis of total costs for each product using activity based costing

ABC limited produces three products at Kariobangi light industries in Nairobi. The following information provide details of the costs, volume and transaction cost drivers for year 2020. Particulars A...

ABC limited produces three products at Kariobangi light industries in Nairobi. The following information provide details of the costs, volume and transaction cost drivers for year 2020.

Particulars	A	B	C
Number of units produced	90,000	30,000	15,000
Direct material (Ksh)	30,000	40,000	15,000
Direct labour (Ksh)	20,000	30,000	10,000
Machine hours per unit (hours)	5	3	7.5
Direct labour hours per unit (hours)	2.5	3	1.5
Number of production setups	5	10	50
Number of packaged deliveries	18	7	50
Number of stores receipts	50	70	700
Number of Engineering orders	45	25	60

The overhead costs are currently absorbed by using a direct labour hour rate and the total of the production overhead for the period has been analysed as follows:

Particulars	Amount (Ksh)
Machining costs	1,000,000
Setup costs	75,000
Stores receiving costs	900,000
Packaging costs	650,000
Engineering costs	750,000
Total	3,375,000

Required

An analysis of total costs for each product if all overhead costs are absorbed on a direct labour hour basis

Using appropriate cost drivers present an analysis of total costs for each product using activity based costing

Jun 09, 2022

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ABC limited produces three products at Kariobangi light industries in Nairobi. The following information provide details of the costs, volume and transaction cost drivers for year 2020. Particulars A...

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