Question

Eco Bikes Ltd. Eco Bikes Ltd. manufactures battery powered bicycles for high end bicycle retailers. They produce several different bicycle models in batches based on demand and seasons. Management needs to get detailed information on their costs in a very competitive market. They have started an ABC costing model to help with their pricing and profitability. They have identified the following activity related information: • Direct labour support is comprised of supervisory, human resources and payroll resources. • Equipment maintenance is labour and materials to keep the production equipment in working order. • Scheduling and preparation represent the production batch scheduling and planning resources Annual Overhead $ 250,000 150,000 30,000 Expected Activity Cost Pools Activity Measure Annual Activity Levels Direct labour support Direct labour hour (DLH) 40,000 Equipment maintenance Machine Hour (MH) 6,000 Scheduling and preparation Production Batches 250 The following data is available for two of the bicycle models. Basic Extreme Direct materials per bicycle $ 200.00 $ 300.00 Direct labour hours per bicycle 6.0 8.0 Direct labour rate $ 30.00 $ 40.00 Machine hours per bicycle 2.0 3.0 Bicycles (units) per batch 20 5

1. What is the activity rate for each of the activities?

2. Calculate the unit cost per bicycle for the two models under ABC costing

3. Under the traditional costing system, the production overhead applied to each bicycle is $80.00

Compute the traditional inventory value for the two bicycle products

4. Eco Bikes Ltd. prices their bicycles by marking up the traditional inventory value by 20%

Compute the bicycle selling prices and then use the ABC derived bicycle product costs to determine the contribution and profitability of the two bicycle models

Answer 1

in case of any query feel free to ask

XI - HomeworkLib.xlsx - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View O x Σ AutoSum και Calibri * Cut E Copy 11 - A A Wrap Text General . HH Fill Paste BIU А 3Merge & Center % +.0 .00 .00.0 Insert Delete Format Format Painter Clear - Conditional Format Cell Formatting as Table Styles Styles Sort & Find & Filter Select Editing Clipboard Font Alignment Number Cells M5218 -- for A B с D E F Н - K L 5195 a) Calculation of ABC Rates :- 5196 5197 5198 5199 Overheads(a) Activity Levels(b) ABC Rates(a/b) 5200 Direct abour Support 250000 40000 6.25 per DLH 5201 Equipment Maintenance 150000 6000 25 per machinehour Scheduling and preparation 30000 250 120 per Production Batch 5202 5203 5204 5205 5206 b) Unit Cost under ABC Basic Extreme Add:- Direct Material 200 300 5207 Add:- Direct Labour 5208 5209 5210 5211 5212 Add:- Direct Labour Support 180 ($30*6 hour) 37.5 ($6.25*6 hour) 50 ($25*2 hour) 6 (120/20) Equipment Maintenance 320 ($40*8 hour) 50 ($6.25*8 hour) 75 ($25*3 hour) 24 (120/5) Add:- 5213 5214 Add:- Scheduling and preparation 5215 5216 5217 Total Cost 473.5 769 5218 Sheet2 Sheet3 ► KI Sheet1 Ready 100% + Type here to search e 54 W ENG 03:52 UKX 10-06-2020 18

XI - HomeworkLib.xlsx - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View O x Cut Σ AutoSum και Calibri 11 - A A Wrap Text General . HH Fill Paste E Copy Format Painter BI U А Merge & Center % +.0 .00 .00.0 Insert Delete Format Clear Conditional Format Cell Formatting as Table - Styles Styles Sort & Find & Filter Select Editing Clipboard Font Alignment Number Cells M5218 -- A B С D E F Н 1 K L 5219 c) Traditional inventory Value:- Basic Extreme Direct Material 200 300 Add:- Direct Labour 5220 5221 5222 5223 5224 5225 5226 5227 5228 5229 5230 180 ($30*6 hour) 80 320 ($40*8 hour) 80 Add:- Overhead Applied Total Cost 460 700 5231 d) Sales Price Basic Extreme Total Cost as per traditional 460 700 5232 5233 5234 5235 5236 Add:- Mark Up 92 140 5237 Sales Price 552 840 5238 5239 Less :- Unit Cost As Per ABC 473.5 769 5240 5241 Profit per unit 78.5 71 5242 5243 Sheet2 Sheet3 K. Sheet1 Ready HE 100% - + o Type here to search e W ENG 03:53 UKX 10-06-2020 18