Determine the absorption rate of overheads, Cost Accounting

Determine the Absorption Rate of Overheads

The budgeted production overheads and other budgeted data of compute are given as:

Budget

Overhead cost for the period = Kshs 36,000                 Production department

Direct material cost                                                                Kshs 32000

Direct labour cost                                                                   Kshs 40000

Machine hours                                                                        Kshs 10000

Direct hours of labour                                                             Kshs 18000

Units of output                                                                        Kshs 10000

Required

Find out the absorption rate of the overheads

Solution

Total overhead costs to be absorbed = Kshs 36000

Absorption rate                                             Calculation

a) Direct material cost                            (36000/32000) x 100 = 112.50 percent

b) Direct labour                                       (36000/40000) x 100 = 90 percent

c) Machine hours                                    shs 36000/10000 hrs = Shs 3.6/machine hour

d) Labour direct hours                            shs 36000/18000 hrs = Shs 2/direct hour

e) Units of output                                    36000/10000 units    = Shs 3.6/unit

f) Prime cost                                            Direct labour + direct material cost = 32000 + 40000 = Shs 72000

∴ Overhead absorption rate based on prime cost = (36000/72000) x 100 = 50 percent

Posted Date: 2/5/2013 7:20:32 AM | Location : United States







Related Discussions:- Determine the absorption rate of overheads, Assignment Help, Ask Question on Determine the absorption rate of overheads, Get Answer, Expert's Help, Determine the absorption rate of overheads Discussions

Write discussion on Determine the absorption rate of overheads
Your posts are moderated
Related Questions
Break-Even Chart This is a diagrammatic presentation of the relationship among costs, prices, expenses and the sales volume. A break-even chart expresses revenue and expens

XYZ Inc. plans to raise $5,000,000 external financing through issuing bonds, and is considering two options: regular bonds and zero couple bonds.  The regular bonds will have coupo

a company has the budget for manufacturing overhead based on direct labor hours. budgeting at 10,000 direct labor hours are as follows. Variable costs= 160000 Fixed Costs


Timbatown Pty Ltd is a manufacturer of timber tables and chairs. The company mostly sells on a retail basis to household consumers, but occasionally receives large orders for table

Describe the ways in which the needs of internal and external users of accounting information are the same and different.

Required Ledgers in Financial System In the financial Systems the Required ledgers are as: The General Ledger Debtors Ledger Creditors Ledger

Sam Edwards has been the accounting manager for Jade Manufacturing in a highly competitive international market for ten years. Jade Manufacturing produces heavy equipment for two m

Comparison between Marginal Costing and Absorption Costing There are accountants who favour all costing method. Arguments in favour about absorption costing are specified a

Choice of Budget Flexing Basis The most suitable flexing basis must be considered where it assists in the comparison of alternative budget data at the planning stage and for