Question: Linacre Co - Activity Based Costing - BPP Kit (Amended)

Linacre Co operates an activity based costing system and has forecast the following information for next year.

General fixed overheads such as lighting and heating, which cannot be linked to any specific activity, are expected to be $900,000 and these overheads are absorbed on a direct labour hour basis. Total direct labour hours for next year are expected to be 300,000 hours.

Linacre Co expects orders for Product ZT3 next year to be 100 orders of 60 units per order and 60 orders of 50 units per order. The company holds no inventories of Product ZT3 and will need to produce the order requirement in production runs of 900 units. One order for components is placed prior to each production run. Four tests are made during each production run to ensure that quality standards are maintained. The following additional cost and profit information relates to product ZT3:

Required
(a) Calculate the activity based recovery rates for each cost pool.      (2 marks)
(b) Calculate the total unit cost and selling price of Product ZT3.        (8 marks)
                                                                                                    
                                                                                                    (10 marks)