Centre specific costs Further cost split

E
Machine Centre X 2,970,000
Machine Centre Y 2,690,000
Assembly 2,480,000

Purchasing components 960,000 480,000

360,000

120,000

Receiving components 600,000 300,000

225,000

75,000

Disburse material 200,000 100,000

75,000

25,000

Production scheduling 1,000,000 250,000

250,000

500,000

Set - up machines 600,000 150,000

150,000

300,000
Quality inspection 200,000 50,000

50,000

100,000

Reconciliation Statement - Traditional to ABC

Product A E

Overhead cost per traditional costing system 66.75

Less: Over-absorped costs (6.62)
Purchasing (4.44)
Receiving (2.18)
Add:under-absorbed costs 45.75
Disbursement 3.88
Production scheduling 19.38
Set-up machines 21.63
Quality inspection 0.875

Overhead costs per ABC system 105.88

Product B
Overhead cost per traditional costing system 133.50
Less over-absorbed costs (32.47)
Purchasing (10.32)
Receiving (6.15)
Disbursement (1.75)
Production scheduling (8.75)
Set-up machines (4.25)
Quality inspection (1.25)

Overhead costs per ABC system 101.03

 TRADITIONAL COSTING SYST

Number of units of cost

Cost driver - traditional costing driver (Hrs) Rate per unit of cost driver

Machine hours 2,000,000 1.485

Machine hours 1,000,000 2.690
Direct labour hours 2,000,000 1.240

Machine hours 2,000,000 0.240

Machine hours 1,000,000 0.360

Direct labour hours 2,000,000 0.060

Machine hours 2,000,000 0.150

Machine hours 1,000,000 0.225

Direct labour hours 2,000,000 0.038

Machine hours 2,000,000 0.050

Machine hours 1,000,000 0.075

Direct labour hours 2,000,000 0.013

Machine hours 2,000,000 0.125

Machine hours 1,000,000 0.250

Direct labour hours 2,000,000 0.250

Machine hours 2,000,000 0.075

Machine hours 1,000,000 0.150

Direct labour hours 2,000,000 0.150

Machine hours 2,000,000 0.025

Machine hours 1,000,000 0.050

Direct labour hours 2,000,000 0.050

Proportion of costs in Proportion of costs in

Traditional Costing System for Activity Based Costing
100 units system for 100 units

0.05625% 0.010%
0.056% 0.020%

0.056% 0.250%
0.056% 0.250%
0.056% 0.417%
0.056% 0.100%

Proportion of costs in Proportion of costs in

Traditional Costing System for Activity Based Costing
200 units system for 200 units

0.225% 0.010%
0.225% 0.020%
0.225% 0.050%
0.225% 0.050%
0.225% 0.083%
0.225% 0.100%
AL COSTING SYSTEM

Number of units of cost Number of units of

driver for 100 units of cost driver for 200
Product A Costs allocated Per unit costs units of Product B

500 742.50 7.43 2,000

1,000 2,690.00 26.90 4,000
1,000 1,240.00 12.40 4,000

500 120.00 1.20 2,000

1,000 360.00 3.60 4,000

1,000 60.00 0.60 4,000

540.00 5.40

500 75.00 0.75 2,000

1,000 225.00 2.25 4,000

1,000 37.50 0.38 4,000

337.50 3.38

500 25.00 0.25 2,000

1,000 75.00 0.75 4,000

1,000 12.50 0.13 4,000

112.50 1.13

500 62.50 0.63 2,000

1,000 250.00 2.50 4,000

1,000 250.00 2.50 4,000

562.50 5.63

500 37.50 0.38 2,000

1,000 150.00 1.50 4,000

1,000 150.00 1.50 4,000

337.50 3.38
 500 12.50 0.13 2,000

1,000 50.00 0.50 4,000

1,000 50.00 0.50 4,000

112.50 1.13

6,675.00 66.75

0.0005625% 0.0001%

0.0005625% 0.0025%

0.001125% 0.00005%

0.001125% 0.00025%

0.50 2
 ACTIVITY BASED COSTING SYSTEM
Number of units of
activity cost driver
for 100 units of
Costs allocated Per unit costs Product A Costs allocated

2,970.00 14.85 500 742.50

10,760.00 53.80 1,000 2,690.00
4,960.00 24.80 1,000 1,240.00

480.00 2.40 1 48.00

1,440.00 7.20 1 36.00

240.00 1.20 1 12.00

2,160.00 10.80 96.00

300.00 1.50 1 60.00

900.00 4.50 1 45.00

150.00 0.75 1 15.00

1,350.00 6.75 120.00

100.00 0.50 5 250.00

300.00 1.50 5 187.50

50.00 0.25 5 62.50

450.00 2.25 500.00

250.00 1.25 5 625.00

1,000.00 5.00 5 625.00

1,000.00 5.00 5 1,250.00

2,250.00 11.25 2,500.00

150.00 0.75 50 625.00

600.00 3.00 50 625.00

600.00 3.00 50 1,250.00

1,350.00 6.75 2,500.00
 50.00 0.25 1 50.00

200.00 1.00 1 50.00

200.00 1.00 1 100.00

450.00 2.25 200.00

26,700.00 133.50 10,588.50

G SYSTEM
Number of units of
activity cost driver
for 200 units of
Per unit costs Product B Costs allocated Per unit costs

7.43 2,000 2,970 14.85

26.90 4,000 10,760 53.80
12.40 4,000 4,960 24.80

0.48 1 48 0.24

0.36 1 36 0.18

0.12 1 12 0.06
0.96 96.00 0.48

0.60 1 60 0.30

0.45 1 45 0.23

0.15 1 15 0.08
1.20 120.00 0.60

2.50 1 50 0.25

1.88 1 38 0.19

0.63 1 13 0.06
5.00 100.00 0.50

6.25 1 125 0.63

6.25 1 125 0.63

12.50 1 250 1.25

25.00 500.00 2.50

6.25 10 125 0.63

6.25 10 125 0.63

12.50 10 250 1.25

25.00 500.00 2.50
 0.50 1 50 0.25

0.50 1 50 0.25

1.00 1 100 0.50

2.00 200.00 1.00

105.89 20,206.00 101.03

 Product B
Product A Differences Differences

- -
- -
- -

(0.72) (2.16)

(3.24) (7.02)

(0.48) (1.14)
(4.44) (10.32)

(0.15) (1.20)

(1.80) (4.28)

(0.23) (0.68)
(2.18) (6.15)

2.25 (0.25)

1.13 (1.31)

0.50 (0.19)
3.88 (1.75)

5.63 (0.63)

3.75 (4.38)

10.00 (3.75)
19.38 (8.75)

5.88 (0.13)

4.75 (2.38)

11.00 (1.75)
21.63 (4.25)
 0.38 -

- (0.75)

0.50 (0.50)
0.88 (1.25)

39.14 (32.47)