Calculation of Costs using Different Methods

MEMO 1
To: Mr. A
From: S
Date: June 2, 2018
Re: the calculation of costs using different methods
Context line: the calculation of costs using different methods
Action: ABC method should be adopted
The following table shows in the costs per unit of telephone using departmental rates:
(Amounts in $)
Particulars Basic Advanced
Direct material
800.0
0
1,600.0
0
Direct labour
600.0
0
600.0
0
Manufacturing overhead
800.0
0
800.0
0
Total variable costs
2,200.0
0
3,000.0
0
Add: overheads:
Fixing department
160.0
0
480.0
0
Testing department 120.0 40.0

MEMO 2
0 0
Total variable costs
2,480.0
0
3,520.0
0
For 1000 units
24,80,000.0
0
35,20,000.0
0
Add: fixed costs:
8,00,000.0
0
4,00,000.0
0
4,00,000.0
0
would be divided into 1:1 since each system requires in
equal number of direct labour hours
Add: departmental costs
16,00,000.0
0
8,00,000.0
0
8,00,000.0
0
would be divided into 1:1 since each system requires in
equal number of direct labour hours
Total costs on the basis
of traditional approach
36,80,000.0
0
47,20,000.0
0
divided by the number of
units
1,000.0
0
1,000.0
0
Cost per unit 3,680.0 4,720.0

MEMO 3
0 0
The following table shows in the costs per unit of telephone using activity based costing
approach:
(Amounts in $)
Particulars Basic Advanced
Direct material
800.0
0
1,600.0
0
Direct labour
600.0
0
600.0
0
Manufacturing
overhead
800.0
0
800.0
0
Total variable costs
2,200.0
0
3,000.0
0
Add: overheads:
Fixing department
160.0
0
480.0
0
Testing department
120.0
0
40.0
0