Question

Q2

The following data relate to a manufacturing department for a period:

Budgeted data for the coming year are as follows:

Direct labour hours 60,000 hours

Machine hours 55,000 hours

Direct labour cost $110,000

Direct material cost $125,000

Production overhead $70,400

Actual data for the period are as follows:

Direct labour hours 55,500 hours

Machine hours 40,000

Direct labour cost $125,000

Direct material cost $150,000

Production overhead $67,800

Required: (1) Calculate the production overhead absorption rate predetermined for the period based on : i. Machine hours; ii. Direct labour hours (2) Two pieces of furniture are to be manufactured for customers. Direct costs are as follows: Job 123 Job 124 Direct material $15,400 $10,800 Direct labour 210 hours Dept. A @$16/ hour: 160 hours Dept. A @20/hour 120 hours Dept. B @$12/hour; 100 hours Dept. B @$18/hour 100 hours Dept. C @$14/hour; 140 hours Dept. C@$10/hour Selling and administrative overheads for each job are 10% of factory cost. Required: (b) Calculate the total costs of each job using all the two bases in question (1) above. (c) If the firm quotes prices to customers that reflect a required profit of 25 per cent on selling price, calculate the quoted selling price for each job.

Answer 1

Solution: Production overhead absolphion rate as per machine hours $67800 Production off's machine hours 4 ou o has $ 1.695 per machine hour (i) As per suect tabour hours Prod" oltt's Direct Labour houn $67860 55wo has = $ 1.2327 per hou.

(6) Statement showing total cost of each job (As per Machine hours) Particulars Job 123 $ 15400 Job 124 $ 10 800 Direct Material Direct labour Depila) [ 210 hours $16 5.by] [ $ 160 hours x $20 phr 3360 3200 1440 HOO 1800 Debu (o) [ 120 homx $12 bhe] [100 heuns $ 18 bhr] Dept (c) [10 hre x $ 14 phy] 1400 [ 140 hux $10 thrl Prime Cost 21600 Production overheadh [ [ 20000 hs x 1.695 [Ascoming that machine houn consumed Jobs equally 3 1400 17200 Ad 33 900 33 900 both Factory cost 55500 51100 [ frime Coat + prod" olisi

क $ 5550 overheads (beiny 10% of 5110 Selling and administrative factory cost). of 55500] [10.. 51100 ) [104 61050 56210 Total Cost using Direct labour hours. Job 123 Job 124 $ 172.00 216co Prime Cost- I calculated in 1" put] Add : 530.06 Production overheads [12321 X 430 hours). [1:2321 X 400 houny 493.08 22130.06 2213 17693.08 1769.31 Add: Factory cost Selling & namn cost [lot of factory cost), 24343.06 19462.39 Tofal Cost

(c) calculating selling fruce for each Job. if 25%. Erupit required on selling Price. Total Cost as fer machine Horus Job 124 Job 123 61050 56210 Lost- 20347.91 18734.79 Add: forfit [ 33.33% of cost ] (Note, Selling price. 81397.97 74944.79 unite 2. 2 Per unit S.P. 40698.98 37472.40 Note, & since, frufit is 25t on sales 33-33 -4 on cost fruce. frice it will be