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QUESTION 1

  1. As an organisation expands, it is common for their product offering to become diversified. Explain the reasons that would cause management to change to an activity based costing system and the benefits that could be expected by the organisation. (05 marks)
  2. The following annual data related to Happy Cow Cheese manufacturing company for July, 2018. The company produces two types of cheese namely; Happy cow Slices and Herbs Cheese

Budgeted

Machine hours

Direct Labour hours

Direct Labour cost

S$33..75 per hour Manufacturing overhead cost

Company uses machine hours as the cost driver.
You are required to,

  1. Calculate the company’s predetermined plant-wide overhead rate (01 marks)
  2. Estimate the overhead costs of each of the two products (02 marks)
  3. Compare the actual overhead cost to o the amount of overhead applied to the two products in July (02 marks)

C. Two companies have identical products, total fixed costs and variable costs per unit, yet one company is able to set a much lower price for its product and still be as profitable as the other company. Explain how this can happen.

Attachments:

cost-manageme….docx