PCR June 06 Exam Queston 1.1 e

dobbieobby Registered Posts: 231 🎆 🐘 🎆
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
    wolfe Registered Posts: 121 🎆 🐘 🎆
    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
    dobbieobby Registered Posts: 231 🎆 🐘 🎆
    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
    wolfe Registered Posts: 121 🎆 🐘 🎆
    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
    dobbieobby Registered Posts: 231 🎆 🐘 🎆
    You're BRILLIANT!!!!! :thumbup:
    Thank you
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