Reference no: EM132923759

Question - Able Manufactory Limited with three departments uses a single production overhead absorption rate, which is expressed as a percentage of direct wages cost. However, it has been suggested that departmental overhead absorption rates would result in more accurate job costs. Set out below are the budgeted and actual data last year, together with information relating to job no. 816.

During the year, job no. 816 incurred the actual costs and actual times in the departments as shown below: After adding production overhead to prime cost, one-third is added to production cost for gross profit. This assumes that a reasonable profit is earned after deducting administration, selling and distribution costs. You are required to:

(a) Calculate the current overhead absorption rate;

(b) Using the rate obtained in (a) above, calculate the production overhead charged to job no. 816, and state the production cost and expected gross profit on this job;