1. Aveery Ltd. Manufactures the following two component parts for the television industry:-
Tvez : Annual production and sales of 50000 units at a selling price of Rs.40.60 per unit.
Premia : Annual production and sales of 25000 units at a selling price of Rs. 60 per unit.
A very includes all R&D and design costs in engineering costs.There is no marketing,distribution or customer service cost. The
Particulars Tvez (Rs) Premia9Rs.) Total (Rs.)
Direct material costs (variable) 850000 600000 1450000
Direct manufacturing labor costs (variable) 300000 200000 500000
Diret machining costs(see note) 150000 100000 250000
Indirect manufacturing costs
Machine setup costs 86250
Testing costs 487500
Engineering costs 450000
Total costs 3223750
Note:- Direct machining costs represent cost of machine capacity dedicated to production of each product.These costs are fix
Avery management identified the following activity cost pools,cost drivers for each activity and cost per unit of cost driver for
Manufacturing Activity Description of activity
Cost Driver Cost per unit of cost driver
Preparing
machine to
manufacture
new batch of Rs. 25 per set
Set up products Set up hours up hour
Testing
components
and final Rs 2 per
Testing product Testing hours testing hour
Costs are
Complexity of assigned to
product and product by
Engineering processes special study
Additional information is as below:
Particulars Tvez Premia
Production batch sizes 500 units 200 units
Set up time per batch 12 hours 18 hours
Testing and inspection time per unit of product produced
2.5 hours 4.75 hours
Engineering costs incurred on each product Rs. 170000 Rs. 280000

2. ustomer service cost. The direct and indirest costs incurred by Avery on Tvez and Premia are as follows:-
roduct.These costs are fixed and are not expected to vary over long term horizon.
per unit of cost driver for each overhead cost pool: