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Management of Accounting Assignment

   

Added on  2020-03-23

4 Pages720 Words47 Views
[TYPE THE COMPANY NAME]Management Accounting

Sunrise Ltd. Produces two types of office desks namely Executive and Elite desks. The company uses traditional method of costing for allocating indirect overheads to products. Thecompany uses machine hours to allocate indirect costs.a) The per unit product cost using conventional costingPre-determined overhead rate = total manufacturing overhead / estimated number of machine hours= $240,000 / 8000= $30The product cost per unit using the conventional costing system:ParticularsExecutiveEliteCost of material per desk$200$300Direct labour costs per desk$180$410Machine hours per desk$10$10Overhead rate$30Indirect cost$300$300Product cost per unit$680$1,010b) Now the company is considering activity based costing system to allocate manufacturing overheads to the products. Three activities have been identified. The cost of each activity is calculated below:ActivityTotal CostsCost allocation baseLevel ofcost driverCost per activityDesign$100,000Design hours4000$25Set ups$65,000Number of set ups50$1300Machine operations$75,000Machine hours5000$15The indirect cost allocation for each product is presented as follow:

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