Assessment question task 8

KayLewis19

Please can someone help with question b) looked at the answers but can't firgure out how overhead absorption rate was calculated. I'm completely clueless about question c) also


Thanks.

PeterC

Overhead absorption rate = overhead per labour hour
Total overheads = £240,000 + £360,000 = £600,000
Total labour hours = 60,000
Overhead per labour hour = 600,000/60,000 = £10

Part (c)

Absorption costing:
Total cost per unit = material + labour + overhead

Product Eff:
Material £10
Labour £40
Overhead £20 (from your answer)
Total cost per unit = 10 + 40 + 20 = £70

Product Gee:
Material £15
Labour £25
Overhead £12.50 (from your answer)
Total cost per unit = 15 + 25 + 12.50 = £52.50

Activity based costing:
Total cost per unit = material + labour + set up + material handling

Product Eff:
Material £10
Labour £40
Set up £3.20
Material handling £9.60
Total cost per unit = 10 + 40 + 3.20 + 9.60 = £62.80

Product Gee:
Material £15
Labour £25
Set up £20
Material handling £15
Total cost per unit = 15 + 25 + 20 + 15 = £75

KayLewis19

@PeterC thank you so much, you're a life saver

PeterC

You're welcome

larora

Hiya

Quick question, how did you find budgeted labour hours (60,000 hours) in this question, Part b?

Everything else makes sense, but this one I couldn't work out.

Pian32

Eff
Hours per unit 2 (40/20)
Budgeted Units 25,000

Gee
Hours per unit 1.25 (25/20)
Budgeted units 8,000

2*25000 + 1.25 * 8000 = 50,000 + 10,000 = 60,000

larora

Many thanks