PCR June 06 Exam Queston 1.1 e

dobbieobby

Can someone please explain why in the answers of this exam they have put overtime at £6, which is the same cost of the basic labour rate? :thumbup:

wolfe

hey. the questions asks for a "direct" labour hr budget .so as the overtime premium is charged to production overheads ,its not included in the direct labour hr budget

dobbieobby

Thank you Wolfe, I can see where I went wrong now. BUT on the answers to question f on the same paper, they haven't added the overtime to the production overheads.
Is this an error??
Also, how do they get the answers to question g please? I cant for the life of me figure it out!!!

wolfe

TASK 1.1 f

u have to calculate cost of production for sigma and theta ( under full absorption costing). this means that along with material and labour overheads will also be included to calculate the cost of production. under marginal(variable) costing overheads wont be included.

the overtime premium will not be included in the DIRECT LABOUR COST BUDGET but would have been included if the question just asked for LABOUR COST BUDGET.

in this case the premium is not included as we have to make direct labour cost budget

the overhead rate which is 10 pounds INCLUDES THE PREMIUM .so premium isnt seperately included in the overheads

TASK 1.1 g

in f the cost of OPENING STOCK of both sigma and theta is to be calculated. the opening stock is given in the question as 995 units for sigma and 1200 units for theta. all that u have to do is multiply this with the FULL ABSORPTION COST OF FINISHED STOCK IN THE BEGINNING OF PERIOD 7 (GIVEN IN THE QUESTION)

so 995 units x 45 pounds=opening stock value of sigma
1200 units x 60 pounds= opening stock value of theta

hope this helps

dobbieobby

You're BRILLIANT!!!!! :thumbup:
Thank you