In this company, there was no opening inventory of materials. During the period, the company purchased 13,989 kilos of material X and 5,049 kilos of material Y.

Product A consumed 5,943 kilos of material X and 1,632 kilos of material Y. Product B consumed 5,175 kilos of material X and 2,217 kilos of material Y.

Indirect purchase costs for the period amounted to €21,193. The cost driver for the Purchase center is the number of kilograms of material purchased.

How high are the indirect purchase costs incorporated into the overall production cost of Product B?

The indirect purchase costs incorporated into the overall production cost of Product B can be calculated by determining the proportion of indirect purchase costs attributed to the quantity of materials X and Y used in the production of Product B.

To calculate the indirect purchase costs for Product B, we need to determine the proportion of indirect costs based on the amount of materials X and Y consumed.

First, let's calculate the proportion of indirect costs attributed to material X:

Proportion of indirect costs for material X = (Quantity of material X consumed for Product B / Total quantity of material X purchased) * Indirect purchase costs

Proportion of indirect costs for material X = (5175 kilos / 13989 kilos) * 21193€

Next, let's calculate the proportion of indirect costs attributed to material Y:

Proportion of indirect costs for material Y = (Quantity of material Y consumed for Product B / Total quantity of material Y purchased) * Indirect purchase costs

Proportion of indirect costs for material Y = (2217 kilos / 5049 kilos) * 21193€

Finally, add the proportions of indirect costs for material X and material Y to determine the total indirect purchase costs incorporated into the overall production cost of Product B.

Total indirect purchase costs for Product B = Proportion of indirect costs for material X + Proportion of indirect costs for material Y

Calculating these proportions will give you the specific amount of indirect purchase costs that are attributed to the production of Product B, which can then be incorporated into its overall production cost.

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