CFOS/Overheads/Exercise 4.2 Sample Answers

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<Return to Unit 4

Apportioning the costs of inspection using the ABC method requires the following calculations:

Total Cost of Inspection for a batch of Product X =

Inspection Hours × Cost per Hour

Unit Cost of Inspection for Product X =

Total Inspection Cost for Product X
divided by the Number of Units of Product X in batch
Kettles – Total Inspection Cost: 10 hours × £25 per hour = £ 250.00
Kettle – Inspection Cost per Unit: £ 250 ÷ 1,000 units = £ 0.25
Toasters – Total Inspection Cost: 20 hours × £25 per hour = £ 500.00
Toaster – Inspection Cost per Unit: £ 500 ÷ 1,000 units = £ 0.50

Compare these figures with the Answers to Exercise 4.1.