Absorption costing

A B C A
Units 15000.00 12000.00 18000.00 Units 15000.00
DM 2.00 3.00 4.00 DL 0.10
DLH 0.10 0.15 0.20 Total DLH 1500.00

Overheads
Cost pools Machine set up costs
total machine setup cost 26550.00 Machine running costs
total machine runing cost 66400.00 Procurement costs
total procurement cost 48000.00 Delivery costs
total delivery cost 54320.00
Total Production cost 195270.00
Total overheads
Cost drivers A B C Total
Production runs 16.00 12.00 8.00 36.00 OAR TBOH
Total machine hrs 7500.00 8400.00 16200.00 32100.00 TAL
purchase orders 24.00 28.00 42.00 94.00 A
deliveries 48.00 30.00 62.00 140.00 $
DM 2.40
Cost Driver Rate DL 1.48
Production runs 737.50 OHDs 2.83
Total machine hrs 2.07 Full production cost 6.71
purchase orders 510.64 Selling price 7.50
deliveries 388.00 P\L 0.79

Allocation of production overheads

A B C TOTAL
$ $ $
total machine setup cost 11800.00 8850.00 5900.00 26550.00
total machine runing cost 15514.02 17375.70 33510.28 66400.00
total procurement cost 12255.32 14297.87 21446.81 48000.00
total delivery cost 18624.00 11640.00 24056.00 54320.00
58193.34 52163.57 84913.09 195270.00
A B C
$ $ $
DM 2.40 3.60 4.80
DL 1.48 2.22 2.96
OHDs 3.88 4.35 4.72
Full produc 7.76 10.17 12.48
Selling pric 7.50 12.00 13.00
P\L -0.26 1.83 0.52
 B C
12000.00 18000.00
0.15 0.20
1800.00 3600.00

26550.00
66400.00
48000.00
54320.00

195270.00

= 195270.00 = 28.30
6900.00
B B
$ $
3.60 4.80
2.22 2.96
4.25 5.66
10.07 13.42
12.00 13.00
1.94 -0.42

interpretation

As seen according to traditional absorption costing the product B is just affected quite a bit by change in the costin
quite a bit by change in the costing techn