2. ABC Ltd has collected the following data for its two activities. It calculate
ID: 2360283 • Letter: 2
Question
2. ABC Ltd has collected the following data for its two activities. It calculates activity cost rates based on cost driver capacity.Activity Cost driver Capacity Cost
Power Kilowatt hours 50000 hrs Kilowatt Rs 200000
Quality Inspection Numbers of inspection 10000 inspection Rs 300000
The Company makes three products, A, B and C.For the year ended March 31, 2004, the following consumption of cost drivers was reported:
Product Kilowatt-hours Quality Inspection
A 20000 7000
B 40000 5000
C 30000 6000
Compute the costs allocated to each product from each activity
Calculate the cost of unused capacity for each activity.
Explanation / Answer
Product
KWH
Cost at $4 per kWh
Quality inspection
Cost at $30 per inspection
Total cost
A
20,000
80000
7,000
210000
290000
B
40,000
160000
5,000
150000
310000
C
30,000
120000
6,000
180000
300000
Used capacity
90,000
360000
18,000
540000
900000
Unused capacity
0
0
0
0
0
Total
50,000
$200,000
10,000
$300,000
$500,000
Product
KWH
Cost at $4 per kWh
Quality inspection
Cost at $30 per inspection
Total cost
A
20,000
80000
7,000
210000
290000
B
40,000
160000
5,000
150000
310000
C
30,000
120000
6,000
180000
300000
Used capacity
90,000
360000
18,000
540000
900000
Unused capacity
0
0
0
0
0
Total
50,000
$200,000
10,000
$300,000
$500,000
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