KLM produces a component, N1P442. The company has total annual overheads of £660,000. These are made up of quality inspection costs of £120,000, design costs of £200,000, materials handling costs of £160,000 and set up costs of £180,000. During the financial year there are 3,600 set ups, 6,000 quality inspections, 6,400 materials handling operations and 2,500 design hours. Component N1P442 accounts for 2,400 set ups each year, 2,000 materials handling operations and 1,500 quality inspections. 500 design hours are allocated to the N1P442 component during the year. Total annual machine hours are 50,000 and component N1P442 uses 30 machine hours for each component. Total annual labour hours are 120,000 and component N1P442 uses 64 labour hours per component. 600 N1P442 components are produced each year. What would be the overhead to allocate to each N1P442 component using an activity-based costing approach to overhead allocation?

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The Answer of KLM produces a component, N1P442. The company has total annual overheads of £660,000. These are made up of quality inspection costs of £120,000, design costs of £200,000, materials handling costs of £160,000 and set up costs of £180,000. During the financial year there are 3,600 set ups, 6,000 quality inspections, 6,400 materials handling operations and 2,500 design hours. Component N1P442 accounts for 2,400 set ups each year, 2,000 materials handling operations and 1,500 quality inspections. 500 design hours are allocated to the N1P442 component during the year. Total annual machine hours are 50,000 and component N1P442 uses 30 machine hours for each component. Total annual labour hours are 120,000 and component N1P442 uses 64 labour hours per component. 600 N1P442 components are produced each year. What would be the overhead to allocate to each N1P442 component using an activity-based costing approach to overhead allocation?

KLM Produces a Component, N1P442