Question

HULLI MANAGEMENT QUESTION 4 4.1 REQUIRED (20) the information provided below to calculate the overhead costs per unit for each product using activity-based costing, INFORMATION max Inc produces two products viz. A and B. The same equipment is used to produce both products. Details of the cost of activities, inputs and outputs are as follows: Overheads cost analysis: Materials handling Materials procurement Set-up Quality control Production 540 000 180 000 540 000 900 000 2 160 000 4 320 000 Cost driver analysis Overheads Materials handling Materials procurement Set-up Quality control Production Cost drivers Materials movements Number of orders Number of set-ups Number of inspections Direct labour hours Product 360 640 216 540 144 000 Product B 180 360 1 44 360 36 000 Total 540 1000 360 900 180 000 Annual output Product A Product B 144 000 units 36 000 units 4.2.. REQUIRED Calculate the following from the information given below: 4.2.1 Break-even quantity. 4.2.2 The number of units that must be sold to obtain a net profit of R300 000. 4.2.3 Break-even quantity, if the selling price is reduced by R20 per unit. SSS INFORMATION R400 following per unit projected data for a product that is the output of Project Mis provided below: R140 R60 Selling price Direct materials Direct labour Variable manufacturing overheads R40 manufacturing overheads are expected to amount to R560 000. Projected administration and keting costs comprise the following: Fixed costs, R400 000 Sales commission of 10%. RCRAMME HANDBOOK: JANUARY 2020 INTAKE

Answer 1

4.1.Overhead cost per unit
	Basis	Product A	Product B
Materials handling	Materials movement	360000	180000
		540000*360/540	540000*180/540
Materials procurement	Number of orders	115200	64800
		180000*640/1000	180000*360/1000
Set up	No of set-ups	324000	216000
		540000*216/360	540000*144/360
Quality control	No of inspections	540000	360000
		900000*540/900	900000*360/900
Production	Direct labour hours	1728000	432000
		2160000*144/180	2160000*36/180
Total Overhead Cost		3067200	1252800
Annual output		144000	36000
Overhead cost per unit	Total overhead cost/Annual output	21.30	34.80
4.2
Selling price per unit	400
Less: Variable cost per unit
1. Direct materials	140
2.Direct labour	60
3.Variable manufacturing overheads	40
4. Sales commission (10% on selling price, 400*10/100)	40
Contribution	120
PV Ratio (120/400*100)	30%
Fixed manufacturing overhead	560000
Projected administration and marketing cost	400000
Total fixed cost	960000
4.2.1 Break -even quanitity
BEP in units= Fixed cost/Contribution per unit	8000
	(960000/120)
4.2.2 No of units to obtain net profit of R300000	10500
	(960000+300000)/120
4.2.3 Breakeven units if selling price is by 20 per unit	9600
	960000/(120-20)