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ACCA Applied Skills · Performance Management · Activity-based costing

Bell Co makes products X and Y. Overheads are: machining $90,000 (driver: machine hours) and setups $60,000 (driver: number of setups). Total machine hours are 10,000 (X 2,000; Y 8,000). Total setups are 40 (X 30; Y 10). X has 1,000 units produced and direct cost of $20 per unit. What is the full ABC cost per unit of X?

The full ABC cost per unit of X is $83. Machining adds $18,000 and setups add $45,000, giving $63,000 overhead, or $63 per unit over 1,000 units. Adding the $20 direct cost per unit gives $83.

  1. A$83Correct
  2. B$63
  3. C$50
  4. D$101

Explanation

Machining rate = $90,000 / 10,000 = $9 per hour, so X gets $18,000. Setup rate = $60,000 / 40 = $1,500, so X gets 30 x $1,500 = $45,000. Overhead is $63,000 / 1,000 = $63 per unit, plus $20 direct cost = $83. $63 omits the direct cost.

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