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
Go the Hershey website to learn how to make Hershey chocolate. (There is also a "print friendly" version of the chocolate making process at the end of the video.) Review the proces

Q. Is there barely one way to conduct fca? Ans. No. It is significant for each area to put the FCA process in perception with its waste management goals. Every community w

preparation of costsheet

Describe briefly the possible causes of: (i)   the material usage variance, (ii)  the labour rate variance, (iii)  the sales volume profit variance.


Generally Accepted Accounting Principles (GAAP) -Rules, conventions and procedures essential to define accepted accounting practice at a specific time. The highest level of such pr

METHODS OF COSTING : 1. Job costing :  Job costing is the essential costing technique appropriate to those industries somewhere the work consist of separate contracts, or batch

Atlanta Company stock is expected to follow an exponential growth rate. The relationship between the current stock price P0, future price PT after time T, and the continuously comp

describe the procedures involved in payroll labour cost accounting

Purpose of Cost Estimation In estimating it assists the future expenditure as cost prediction like the expenditure will depend upon the cost of the respective activities a)