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    Week 4 - Seminar 3 Trimake Solution A) and B) Only

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    china xi
    The document presents a case study for Trimake Ltd, which produces three products using similar production methods. It provides production volume and cost data to calculate the cost per unit for each product using conventional and activity-based costing methods. Under conventional costing, the cost per unit ranges from £49 to £115. Activity-based costing traces overheads to cost pools like set-up, machinery, and inspection based on cost drivers. This lowers the cost per unit for each product to between £69-£95 due to a more accurate allocation of overheads.

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    Week 4 - Seminar 3 Trimake Solution A) and B) Only

    Uploaded by

    china xi
    172 views3 pages
    The document presents a case study for Trimake Ltd, which produces three products using similar production methods. It provides production volume and cost data to calculate the cost per unit for each product using conventional and activity-based costing methods. Under conventional costing, the cost per unit ranges from £49 to £115. Activity-based costing traces overheads to cost pools like set-up, machinery, and inspection based on cost drivers. This lowers the cost per unit for each product to between £69-£95 due to a more accurate allocation of overheads.

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    Week 4 - Seminar 3 Trimake Solution a) and b) only.xls

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    The document presents a case study for Trimake Ltd, which produces three products using similar production methods. It provides production volume and cost data to calculate the cost per unit for each product using conventional and activity-based costing methods. Under conventional costing, the cost per unit ranges from £49 to £115. Activity-based costing traces overheads to cost pools like set-up, machinery, and inspection based on cost drivers. This lowers the cost per unit for each product to between £69-£95 due to a more accurate allocation of overheads.

    Copyright:

    © All Rights Reserved
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    172 views3 pages

    Week 4 - Seminar 3 Trimake Solution A) and B) Only

    Uploaded by

    china xi
    The document presents a case study for Trimake Ltd, which produces three products using similar production methods. It provides production volume and cost data to calculate the cost per unit for each product using conventional and activity-based costing methods. Under conventional costing, the cost per unit ranges from £49 to £115. Activity-based costing traces overheads to cost pools like set-up, machinery, and inspection based on cost drivers. This lowers the cost per unit for each product to between £69-£95 due to a more accurate allocation of overheads.

    Copyright:

    © All Rights Reserved
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    of 3

    8.

    25 Trimake Ltd Case Study

    Briefing a)

    Trimake makes 3 main products, using broadly the same production


    methods and equipment for each. A conventional product costing system
    is used at present, although an activity-based costing (ABC) system is being considered.
    Details of the three products for a typical period are:
    Hours per unit
    Material Volumes
    Lab'r hrs Machine unit per unit Units
    (£)
    Product X 1/2 1 1/2 20 750
    Product Y 1 1/2 1 12 1250
    Product Z 1 3 25 7000

    Direct labour costs £6 per hour and production overheads are absorbed on a
    machine hour basis. The rate for the period is £28 per m/c hour.

    a) You are required to calculate the cost per unit for each product using conventional methods.

    Further analysis shows that the total of production overheads can be divided as follows:

    Costs relating to set-ups 35.00%


    Costs relating to machinery 20.00%
    Costs relating to materials handling 15.00%
    Costs realting to inspection 30.00%
    Total production overhead 100.00%

    The following activity volumes are associated with the product line for the period as a whole.

    Total activities for the period:

    N'br of Nb'r of Number


    set-ups movements of inspections
    of materials
    Product X 75 12 150
    Product Y 115 21 180
    Product Z 480 87 670
    670 120 1000

    You are required

    b) to calculate the cost per unit for each product using ABC principles;

    c) to comment on the reasons for any differences in the costs in your answers to a) and b).
    8.25 Trimake Ltd Case Study

    Solution a) production cost per unit (conventional method)

    Product X Product Y Product Z


    (£) (£) (£)
    Direct labour at £6 per hour 3 9 6
    Direct materials 20 12 25
    Production overhead at £28 per m/c hour 42 (11/2hrs) 28 (1 hr) 84 (3 hrs)

    65 49 115
    8.25 Trimake Ltd Case Study

    Solution b)
    the total production overhead is derived from the overheads allocated to the product in part a):

    (£)
    Product X 31 500 (750 X £42)
    Product Y 35 000 (1250 X £28)
    Product Z 588 000 (7000 X £84)
    Total Production Overhead 654 500

    Overhead costs traced to cost pools:

    Set-up cost 229 075 35.00%


    Machining 130 900 20.00%
    Materials handling 98 175 15.00%
    Inspection 196 350 30.00%
    654 500

    Costs driver rates:


    (£)
    Cost set-up cost 341.903 (£229075/670)
    Cost per machine hour 5.600 (£130900/23375*)
    Cost per material movement 818.125 (£98175/120)
    Cost per inspection 196.350 (£196350/1000)

    Note:
    *Machine hours = (750x 11/2) +(1250 X 1) + (7000 X 3) = 23375 (Volume of units x m/c hrs per unit)

    Overhead cost assigned to each product:


    Product X Product Y Product Z
    (£) (£) (£)
    Set-up cost at £341.903 25 643 (75) 39 319(115) 164 113(480)
    Machining at £5.60 per machine hour 6 300(1125) 7 000(1250) 117 600(21000)
    Materials handling at £818.125 per movement 9 817(12) 17 181(21) 71 177(87)
    Inspection at £196.35 per inspection 29 453(150) 35 343(180) 131 554(670)
    71 213 98 843 484 444

    Number of units 750 1250 7000


    Overheads cost per unit £95 £79 £69

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