Prominent Factors

Question 1 Total 8 Marks

You are a management internee at the Gadgets Company. The company operates with two Divisions, Xen and Yen and produces designer toy cars. For Division Xen, the management applies overhead costs on the basis of direct labor cost, and for Division Yen, it applies overhead costs on the basis of machine-hours. The company completed Job FIN-E in late 2017. The company’s books reveal the following additional information:

Screenshot from 2018-10-01 16-23-40

Required: Your supervisor has asked you to work out the following, showing all your calculations (round off to two decimal places):

  1. The manufacturing overhead rate (budgeted) for Division Xen.
  2. The manufacturing overhead rate (budgeted) for Division Yen.
  3. The total overhead cost (budgeted) allocated to Job FIN-E.
  4. The unit cost for job FIN-E if the Job required Gadgets to produce 1065 designer toy cars.

Question 2 Total 4 Marks

Companies usually, in pursuit of refining their costing system, adopt Activity-Based Costing systems with an aim to arrive at accurate cost figures. Describe, in your own words, the prominent factors/reasons (any four) that contribute to these companies’ taking such initiatives. That is, what are the main factors that are causing these companies to consider refining their costing systems?

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