Practice exam 2 - task 5; can someone explain?

Tabitha005

I got the first part of the question correct when working out the absorption rates as follows:
machine hr £12
labour hr £6
unit £4

So why, then, does part (b) of the answer give the overhead absorption rates as:
machine hr £2
labour hr £3
unit £4

????

Pian32

So each machine hour absorbs £12 but each unit only takes 10mins of machine time so only absorbs 12/6 = £2. Same for labour 30 mins so 6/2=£3

Tabitha005

Thank you for responding. Stupidly, I hadn't fully read the question - that'll teach me!

stefania

Can someone explain please how do you get £18.50 on direct cost?! I need to find a logical way to understand it!!! Thanks

Pian32

Hi Stefania

I can't see the full question only what was above. Direct costs are things that are directly required for the product. So materials, labour etc the rent and heating would be indirect as they are paid independant of the product produced.

stefania

Hi,
I hope the picture attached is clear enough.
Thank you!!!

stefania

Hi,
I hope the picture attached is clear enough.
Thank you!!!

stefania

For s> @Pian32 said:
> Hi Stefania
>
> I can't see the full question only what was above. Direct costs are things that are directly required for the product. So materials, labour etc the rent and heating would be indirect as they are paid independant of the product produced.

For some reason it doesn't let me attach a picture. Is there any other way I can send it to you?!

stefania

For s> @Pian32 said:
> Hi Stefania
>
> I can't see the full question only what was above. Direct costs are things that are directly required for the product. So materials, labour etc the rent and heating would be indirect as they are paid independant of the product produced.

For some reason it doesn't let me attach a picture. Is there any other way I can send it to you?!

stefania

For s> @Pian32 said:
> Hi Stefania
>
> I can't see the full question only what was above. Direct costs are things that are directly required for the product. So materials, labour etc the rent and heating would be indirect as they are paid independant of the product produced.

For some reason it doesn't let me attach a picture. Is there any other way I can send it to you?!