Question

•Festa Oy’s one cost centre has indirect costs of: –Variable indirect costs 70000 € –Fixed indirect...

•Festa Oy’s one cost centre has indirect costs of:

–Variable indirect costs 70000 €

–Fixed indirect costs 28000 €

–Total 98000€

•In this cost centre, machine hours are used in measuring the level of activity.

•The normal level of activity is 700 and the real level of activity is 600 machine hours.

•One product has direct material costs 50 €/piece and direct labour costs 100 €/piece

•In producing this product, the cost centre in question is used for 3 machine hours. Other cost centres are not used in the production of this product.

•What is the minimum production value and the normal production value of this product?

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Answer #1

Particulars Minimum production value(600 hrs) Normal production value(700 hrs)

Direct material costs 10000 10000

Direct labour costs 20000    20000   

Indirect costs

Variable costs 70000 70000

Fixed costs 28000 28000

Total cost 128000 128000

No of units produced 600/3=200 700/3=233

cost per unit 640 Euros 549 Euros

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