Calculate the overhead absorption rates

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Reference no: EM132342042

QUESTION 1 - Gold Dust Ltd has produced the following budgeted data for its current financial year:-

 

£

£

Sales

 

2,900,000

Direct materials

400,000

 

Direct labour

500,000

 

Production overhead

1,200,000

 

Production cost

 

2,100,000

Gross Profit

 

800,000

Labour hours

48,000

 

Machine hours

60,000

 

Output in units

400

 

Job 227 has recently been completed and the job sheet shows the following details.

Direct materials - £1100

Direct labour - £3000

Labour hours used - 110

Machine hours used - 140

Required:- a) Calculate the overhead absorption rates (POAR) using the following methods:

  • % of direct materials
  • % of direct labour
  • Per unit produced
  • Labour hour rate
  • Machine hour rate

b) Using the POARs calculated in part a) above, compute the production cost of Job 227 using each of the following methods:

  • % of direct materials
  • Labour hour rate
  • Machine hour rate

QUESTION 2 - A company makes two products, Product X and Y. Each product is processed through two cost centers, CC1 and CC2. The following budgeted data is available.

 

CC1

CC2

Allocated and apportioned overheads (All overheads are fixed costs.)

$126,000

$180,000

Direct labour hours per unit

 

 

Product X

1.5 hrs

2.0 hrs

Product Y

1.2 hrs

2.6 hrs

The budgeted production is 12,000 units of Product X and 10,000 units of Product Y. Fixed overheads are absorbed into costs on a direct labour hour basis.

Required - Calculate the budgeted total fixed overhead cost per unit for Product X and for Product Y.

Reference no: EM132342042

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