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
Good Food Company is a local manufacturer of instant noodles. Established in 2005, their business has been growing steadily. Their products, which are available in 3 flavors, are s

with relevant illustrations and examples, discuss the different overhead costing and control method.

Break-Even Calculations As they say, a picture is significance a thousand words, and this is undoubtedly true for the CVP graphic just presented. Though, everyone is not an art

Pyramid Printing Company is a printer of magazines and retail inserts. In addition, there are two joint products (food wrapping and book covers) and one byproduct (shipping-box ins

Last in first out or LIFO LIFO is based upon the assumption such the stock purchased last is issued first. Stock valuation should here be based upon the prices ruling on acqui

2. Blue-Jay Sporting Goods is a start-up company that expects to earn $3.00 per share next year. Since the firm currently retains 100 percent of earnings to finance future grow


Example of ABC System Assume an example, such the cost pool for the ordering activity totaled of Ksh.100, 000 and such there were 10,000 orders the cost driver. Therefore all

Describe the manner in which a materials usage variance is divided into mix and yield component variances.

how the NHS might use ABC to (a) produce ‘product costs’ for services, and to (b) evaluate the internal efficiency, quality and profitability per product or service line. Both bene