Home For AAT student members AQ 2016 Professional Diploma in Accounting Management Accounting: Decisions and Control

Assessment question task 8

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.

Best Answer

  • PeterCPeterC Registered, Tutor Posts: 214
    Accepted Answer
    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

Answers

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