ABC Company produces three products X, Y and Z. Similar type of material is used in the production of all the three products. The company has been…

ABC Company produces three products X, Y and Z. Similar type of material is used in the production of all the three products. The company has been using traditional absorption costing method, using direct labour hours to allocate overheads to its products. The Cost Accountant has suggested considering an activity based costing system. The following information is available in the records of the company. X Y Z Production Volume p.a. (In units) 16,000 17,000 15,000 Direct Material per unit 3 kg 4 kg 5 kg Labour hours per unit 0.10 0.15 0.20 Machine hours per unit 0.5 0.7 0.9 No. of Production runs p.a 50 65 60 No. of purchase orders p.a 5 10 15 No. of order shipped p.a 25 35 32 Activity Cost (₹) Cost Driver Machine setup costs 49,000 Production Runs Machine running costs 64,128 Machine hours Purchase cost 52,050 Purchase orders Delivery cost 46,460 Orders shipped The price of Raw Material is 2 per kg. Direct labour cost per hour is 20. On the basis of above Case Scenario, you are required to answer the following MCQs 1 to 5: