PCR June 05

kap

Can anyone help on task 1.0 e)
I thought that if you have overtime premium and it says you should charge this to the overheads and not to labour the answer should be 10.500x8=84000, overtime 1000x8=8000 not 12000 and the £4000 would go to overheads.
would anyone help?
thanks

Tracie

kap wrote: »

Can anyone help on task 1.0 e)
I thought that if you have overtime premium and it says you should charge this to the overheads and not to labour the answer should be 10.500x8=84000, overtime 1000x8=8000 not 12000 and the £4000 would go to overheads.
would anyone help?
thanks

11,500 hours is the total hours required for production:

therefore 11,500 hrs x £8 £92,000 (this is cost of direct labour)
1000 hrs x £4 4,000 (this is premium)

Could also do it as 10500 x £8 = £84,000
1000x £12= £12,000

both will get the same answer but only the £92,000 whole of hours required for production at basic rate will get charged to direct labour.

This is why i got confused in the June 2008 paper because the production jours were less than total hours and i only charged hours required for prodction to direct labour. I suppose it makes sense that even if they do not have to work the hours to produce goods we still have to pay them but got confused. Still confusded i think?

kap

Thank you so much for the explanation, it is clear now. I have looked at other papers as well to confirm.
thanks again.

tezza.b

I am also confused about the operating statement at the end of section 1.1
Why have they done it with cost of production at the top and the + opening stock - closing stock and turnover etc??
As in all other exam papers, when asked to do the operating statement, it has always been sales volume at the top and turnover - expenses to give profit :confused1:

kap

Cost of labour budget ) )
Normal hours ) (10,500 ¥ £8) £84,000)
Overtime ) (1,000 ¥ £12) £12,000)
£96,000
this is the answer they give us.
Sorry I am drilling on this. I still don't understand why the charged £4000 to labour budget and not to overheads (this is the premium).

In terms of the operating profit I think it is stil the same whatever way you put it as long as you have the same answer although I thought the layout is important!!!