Home For AAT student members AQ 2013 AAT Level 2 (Level 5 in Scotland)

Working out Labour Hour using Overhead Absorption Rate?

I am doing Elements of Costings exam next week and cant get my head around working out the Labour Hour using overhead absorption rate.
The question gives you part a) Machine Hours, Labour Hours, Units and Overheads... which then need to be put into a table
part b) Gives you more information on material, labour and production time which then needs to be put into a second table.

I understand the whole question, but can not seem to understand how to get the Labour Overheads on the second table?

Can someone help? - Will try and post an example in the comments

Thank you


  • jadeterryjadeterry Registered Posts: 26
    Cant work out how to add the photo, but the question is on all practice assessments and is usually question 5.

  • AminoAlexAminoAlex Registered, Tutor Posts: 17
    Hi Jade,

    I know the style of question you mean.

    If you're trying to calculate the second part of the table, convert the labour time to decimal.

    So for example, if it's 15mins @ £20 per hour as seen in the mock, you want to do 15/60 = 0.25. Then to 0.25 x £20 = £5.00

    Then for the overheads part, you use the 0.25 and multiply by the OAR as calculated in the above table.

    As you'll see in mock number 1, both labour and machine end up with exactly the same answers!

    Hope that helps,

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