Pigeon Ltd makes two products, Robins and Wrens
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Pigeon Ltd makes two products, Robins and Wrens

Question 2

Pigeon Ltd makes two products, Robins and Wrens. Information relating to each of these products is set out below.


The finance director of Pigeon Ltd has recently produced the following analysis of overheads and their relevant cost drivers.


Required:

(a) Calculate the total cost per unit and profit per unit for each product using:

(i) the traditional full cost method of overhead absorption (based on labour hours)

(ii) the activity-based costing method

(b) Comment on your findings

Hint
Accounts & Financea) Absorption costing designates fixed above expenses for an item whether it was sold in the period. This kind of costing strategy implies that more expense is remembered for the completion stock, which is persisted into the following time frame as a resource on the accounting report...
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