Assessment question task 8

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

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