Management Accounting

Management Accounting

Contents
Contents...........................................................................................................................................2
TASK 1............................................................................................................................................3
Calculation of the absorption cost for each type of stove...........................................................3
Calculation of the activity-based cost for Lightweight of stove..................................................3
Calculation of the activity-based cost for Megarange of stove...................................................3
TASK B...........................................................................................................................................4
Interpretation................................................................................................................................4
Activity based budgeting.............................................................................................................4

TASK 1
Calculation of the absorption cost for each type of stove.
Particular Lightweight Megarange
Purchasing 18000 12000
Training 400 600
Set up 1500 750
Running 12825 1425
Total 32725 4775
Number of units 4500 500
Absorption rate 7.27 9.55
Calculation of the activity-based cost for Lightweight of stove.
Activity Cost driver Overhead cost Estimate units Rate
Purchasing Purchase order 20,000 360 55.55
Material Material 13500 4500 3
Training Training hour 1,000 20 50
Setting up
machines
No. of set-ups 2,250 60 37.5
Running
machines M
Machine hours 1 14,250 67,500 .0211
Calculation of the activity-based cost for Megarange of stove.
Activity Cost driver Overhead cost Estimate units Rate
Purchasing Purchase order 20,000 40 500
Material Material 5000 500 10
Training Training hour 1,000 30 33.33