ACC502 Tutorial Question Topic 7

8.23
Super Max Ltd manufactures high-fidelity compact disc players and uses an activity-based
product costing system that assigns labour and overhead costs. An incomplete bill of activities
for one of Super Max’s product, Hi-Fi CD player is presented on the next page:

Super Max Ltd Bill of activities: HI-Fi CD Player

Activity Cost per unit of activity Annual quantity of activity
driver drivers used by the product
Process payables $60 per purchase order 400 purchase orders
Program production $225 per production schedule 100 schedules
Process sales orders $75 per sales order 300 sales orders
Issue materials $120 per issue 100 issues
Set up solder machine $158 per set up 100 set ups
Solder circuit boards $15 per solder joint 40000 solder joints
Insert motor $30 per player 5000 players
Assemble player $18 per player 5000 players
Design player Directly assigned cost of $12000 for model Hi-Fi CD Player

Required:
1. Estimate the total activity cost of the Hi-Fi CD Player, calculated on:
a. An annual basis
b. Per unit basis, assuming the annual production is 5000 units
2. Determine the total unit cost of the product, if the direct material cost of a Hi-Fi CD
Player is $50 per unit.
3. Using your answer in part (2), predict the price at which each Hi- Fi CD Player should be
sold if Super Max Ltd wants to make a mark up on cost of 30%.

Additional Question
Continued on the next page…