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4 marksActivity-Based Costing (ABC)

CAPE Accounting Unit 2 · 2010 · Paper 2 · Question 2(b)(ii)d)

A company produces premium and super products with given estimated overhead ($4 000 000), unit production, direct labour hours, and existing cost breakdown under traditional costing. It also provides traceable costs and cost driver activity across four activity centres.

Based on your previous calculations, explain why the company's profitability has been declining since the introduction of the premium product.

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Other parts of this question

  1. 2(a)(i)Calculate the total shop overhead applied to jobs in August.[2 marks]
  2. 2(a)(ii)Determine by how much shop overhead was over- or under-applied during August.[3 marks]
  3. 2(a)(iii)Compute the cost of the completed jobs (Jobs 811, 813, and 814) for the month.[10 marks]
  4. 2(a)(iv)Compute the total cost of jobs in process on August 31.[4 marks]
  5. 2(b)(i)Describe the MAIN difference between traditional costing systems and activity-based costing systems.[2 marks]
  6. 2(b)(ii)a)Compute the activity application rate for EACH activity centre for 2009.[4 marks]
  7. 2(b)(ii)b)Compute the total overhead cost assigned to EACH product in 2009 using activity-based costing.[4 marks]
  8. 2(b)(ii)c)Compute the total cost to manufacture ONE unit of EACH product in 2009 using activity-based costing.[2 marks]

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