Overhead recovery rate ..

topcat
topcat Registered Posts: 452
in AAT Level 4 (Level 8 in Scotland)
Hello,

"the budget production of 15,000 units of A plus 5000 units of B will require 4000 machine hours and 1050 direct labour hours"

Over head recovery should be based on:

-units of output
-Labour Hours
-Machine hours

The answer is machine hours

Just wondering why not units as there is more of them ?

Comments

  • Jules18
    Jules18 Registered, Tutor Posts: 102 Dedicated contributor 🦉
    I am speculating it is because the AATgenerally examine based on the two commonly-used measures which are total numbers of direct labour hours and total numbers of machine hours for absorption rate calculations.
  • topcat
    topcat Registered Posts: 452
    Jules18 wrote: »
    I am speculating it is because the AATgenerally examine based on the two commonly-used measures which are total numbers of direct labour hours and total numbers of machine hours for absorption rate calculations.

    Thanks Jules ! :-)

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