(SOLVED) Silver water Ltd manufactures sophisticated six tuner personal video recorders and


Question Description:

$20

Silver water Ltd manufactures sophisticated six-tuner personal video recorders and has decided to develop an activity-based product costing system to assign labour and overhead costs to products. The table below lists Silver-water’s costs during the current year and the resource drivers to be used to assign these costs to activity centres.
Required:
1. Calculate the costs assigned to the Assembly Centre given its usage of resource drivers during the year, as follows:
Number of employees …………………………………. 20
Floor area ……………………………… 100 square metres
Power used ………………………. 10 000 kilowatt hours
2. The costs listed above are not individual costs but a series of costs grouped together into cost categories such as wages, building costs and so on. Explain why Silver-water combined the costs from its general ledger into cost categories. Under what conditions is it appropriate to combine costs into cost categories? Give three examples of the types of costs likely to be included in each category.
3. What is meant by the term resource driver? Can you suggest a better basis for assigning ‘Wages’ to activity centres?

Answer

$20