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  1. avatar says

    Hi.

    I used the production to do my overhead absorption…… 3:2 Ratio

    Desk = 700000*3/5 = 420000/30000 = $14.00
    Chair= 700000*2/5 = 280000/20000= $14.00

    I know that this is not correct based on your explanation. But can you explain yes we are using the production hours and not the production units?

    • Profile photo of John Moffat says

      In real life you can deal with the overheads in whichever way you think more sensible.
      In exams you are told how to absorb them, and this questions says in the last line that they are to be absorbed on the basis of labour hours.

      The logic is that if each desk takes 4 times as long as a chair in the factory, then it would seem only fair that they should be charged with 4 times as much in factory overheads.

      (Had the question said to absorb on a unit basis, then your answer would be correct. Although you made it too complicated – all you would need to do is divide total overheads by total unit – $700000/50000 = $14 per unit)

    • Profile photo of John Moffat says

      It depends which paper you want.

      There are three financial accounting papers – they are F3, F7 and P2 (F3 is the basic – P2 is the most advanced)

      You can find links to then from the main ACCA page.

      • avatar says

        Sir moffat, I got a personal question. I already passed my F3 ( 26 th dec 2013 ). But on my examination status on acca global it said that F3 financial accounting to be attempted. Why it didn’t said that i pass. I got 54 % and was taking private tuition with a tutor.

      • Profile photo of John Moffat says

        I assume that you took the computer based exam and that it was at a licensed centre?
        The firm of tutors that administered the exam should have uploaded the result to the ACCA and it should then have appeared on your account within 72 hours.

        Did you receive a provision notification of your result immediately you finished the exam?

        You need to contact the place where you took the exam and ask what has happened. If they do not sort it out then you need to email the ACCA as soon as possible.

      • avatar says

        Yes i took a CBE exam and it was a licensed centre. I received an email from the admin of acca global on 27 th dec confirming that i passed my F3 but it still don’t appear on my examination status. I hope that i won’t have to take the exam again

  2. avatar says

    Hi

    Regarding example 2:

    I know this is wrong, but WHY couldnt you work out FIXED COSTS fro desks and chairs as follows:

    LBR HRS for desks = 30 000 x 4 = 120 000
    And so Fixed costs per desk = 700 000/120000 = 5.83

    LBR HRS for chairs = 20 000 x 1 = 20 000
    And so Fixed costs per chair = 700 000/20 000 = 35

    Thanks

  3. avatar says

    Hi would appreciate help with his Question

    The following Data relates to a company’s Overhead Cost

    time: 3 yrs ;OutPut (unit) 2000 : O/H Cost 8,800: Price Index 132

    Current year: Output (unit) 5000: O/H Cost 31000: Price Index 164

    Using the High Low Technique. what is the Variable cost per unit ( to the nearest $0.01) express in the current year.

    • Profile photo of John Moffat says

      What you need to do is restate the ‘3 years’ (I assume you mean three years ago) in current year prices.

      To do this, you take the cost in the question (8800) and multiply it by 164/132.

      When you have done this, you can use the normal high/low technique and the variable cost that you calculate will be in current year prices.

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