is it the only way, what i mean is, would it be right if we calculate the overhead cost per unit instead of overhead per hour?what makes the difference?
If you watch all of the lectures for this chapter, then this is all explained.
If there is only one product then overhead per unit would be the same as overhead per hour.
However, if (for example) you have one product that takes 1 hour per unit to produce, and another product that takes 2 hours per unit to produce, then it is only sensible to charge the second product with twice as much overheads per unit that the first product. We achieve this by calculating a cost per hour, and then a cost per unit by multiplying the cost per hour by the number of hours per unit.
I’ve attempted to do the test on this chapter, but can’t quite get the right answer to question 3. I get $10 and the answer is $13. My workings are the following. Total Overhead costs for Product X = 88,000 divide that by total hours worked on Product X (8000 *2.5) answer is 4.4, same thing for product Y (96,000/16000) = 6. Therefore, total overhead cost per unit is 10. What am I missing? Thanks in advance for the help
Yes, it was indeed question 4, and the Products X and Y that I was referring to were supposed to be L and M, apologies for the confusion. I got the right answer now. My mistake was to calculate the overhead costs by product (i.e. picking the numbers horizontally) instead of by department (then multiplying by the number of hours it takes for each product). Is it safe to say that that is the correct approach every time? i.e. to calculate departmental absorption cost first?
Sir, I used to see your lecture videos on my android phone but, suddenly the browser just stopped working and up till now, I have not been able to see the videos again. I also downloaded several browsers but no result. Please what can I do? Or have you restricted people from Nigeria from viewing your videos?
Nothing has changed on the site, so if you could view lectures before, and You cannot now, the problem at your end, Your Internet provider/ or your device,..
hi sir i want to ask you that i looked many questions on under/over absorption in bpp kit but i didnt see any lectures on it and also in course notes so please tell me is it in course of f2 in 2015 because i have old edition book of bpp
sir i want to ask you that i look many questions on under/over absorption in bpp kit but i didnt see any lectures on it and also in course notes……so please tel me is it in course or not because i have a book of bpp 2011 edition….
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)
Accounting for labour is chapter 6 in the Course Notes. There is no separate chapter for materials – the important part is covered in chapter 5, inventory control.
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.
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.
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
We are trying to calculate the cost of 1 desk. If it costs $700,000 to make 50,000 units, then the cost of each unit is $700,000 / 50,000. There is no theory to it 馃檪
daud4328 says
is it the only way, what i mean is, would it be right if we calculate the overhead cost per unit instead of overhead per hour?what makes the difference?
John Moffat says
If you watch all of the lectures for this chapter, then this is all explained.
If there is only one product then overhead per unit would be the same as overhead per hour.
However, if (for example) you have one product that takes 1 hour per unit to produce, and another product that takes 2 hours per unit to produce, then it is only sensible to charge the second product with twice as much overheads per unit that the first product.
We achieve this by calculating a cost per hour, and then a cost per unit by multiplying the cost per hour by the number of hours per unit.
daud4328 says
Thank you very much sir, i watched all of your lectures for F2 they are pretty awesome and thanks for the explanation above, your the best!
John Moffat says
Thank you very much for your comment 馃檪
Rachel says
Mr. Moffat,
I’ve attempted to do the test on this chapter, but can’t quite get the right answer to question 3. I get $10 and the answer is $13. My workings are the following. Total Overhead costs for Product X = 88,000 divide that by total hours worked on Product X (8000 *2.5) answer is 4.4, same thing for product Y (96,000/16000) = 6. Therefore, total overhead cost per unit is 10. What am I missing? Thanks in advance for the help
Rachel
John Moffat says
I think you are referring to test question 4 (not 3).
Look back at the way I answered example 3 in the lecture, because it is exactly the same idea.
You need to work out an absorption rate for each of the two departments separately.
There are no products X and Y – they are departments. The products are L and M.
So the absorption rate for department X is $88,000 / (( 8,000 x 3.0) + (8,000 x 2.5)) = $2 per hour.
You need to do the same for department Y.
Then you can calculate the cost per unit for M as 2.5 hours at $2, plus 2 hours at the absorption rate for department Y.
Rachel says
Mr. Moffat,
Yes, it was indeed question 4, and the Products X and Y that I was referring to were supposed to be L and M, apologies for the confusion. I got the right answer now. My mistake was to calculate the overhead costs by product (i.e. picking the numbers horizontally) instead of by department (then multiplying by the number of hours it takes for each product). Is it safe to say that that is the correct approach every time? i.e. to calculate departmental absorption cost first?
Thanks again!
Rachel
John Moffat says
Yes – you are correct 馃檪
BELLO OLAIDE TITUS says
I could view it before December diet, but it all started few days to exams
John Moffat says
But you have not answered my question. Are you able to view the lectures on computer? Is all access not working, or just access on your phone?
BELLO OLAIDE TITUS says
Sir, I used to see your lecture videos on my android phone but, suddenly the browser just stopped working and up till now, I have not been able to see the videos again. I also downloaded several browsers but no result. Please what can I do? Or have you restricted people from Nigeria from viewing your videos?
John Moffat says
We do not restrict any countries (although countries might restrict us!).
Is it only the phone (can you view the lectures on a computer)?
ziah says
I also can’t view the lectures until march all were accessible.
opentuition_team says
Nothing has changed on the site, so if you could view lectures before, and You cannot now, the problem at your end, Your Internet provider/ or your device,..
usman says
hi sir
i want to ask you that i looked many questions on under/over absorption in bpp kit but i didnt see any lectures on it and also in course notes so please tell me is it in course of f2 in 2015 because i have old edition book of bpp
John Moffat says
Under/over absorption is part of absorption costing and is dealt with in that lecture.
It is in the current syllabus.
(Although you should get a current edition of the Revision Kit because the format of the exam has changed.)
usman says
thanks sir……
usman says
sir
i want to ask you that i look many questions on under/over absorption in bpp kit but i didnt see any lectures on it and also in course notes……so please tel me is it in course or not because i have a book of bpp 2011 edition….
BELLO OLAIDE TITUS says
Hello sir John, I really enjoyed the way you teach Pls where can I found the complete part of this example 3. You didn’t finish it in the video.
John Moffat says
This lecture says ‘part (a)’, so now watch part (b) 馃檪
Lian says
I like you very much and your lectures as well :)))))) Thank you .
John Moffat says
Thank you very much 馃檪
Kerri - Ann 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?
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)
Max Huelber says
hi John;
i’d like to know where i can find in here the financial accounting subject??
regards
MAX
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.
hirrofic says
please sir where i can find accounting for labour and materials ?
John Moffat says
Accounting for labour is chapter 6 in the Course Notes.
There is no separate chapter for materials – the important part is covered in chapter 5, inventory control.
hirrofic says
thanks 馃榾
hirrofic 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.
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.
hirrofic 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
John Moffat says
You certainly will not have to take the exam again.
However I would email the ACCA and ask them why it does not appear on your status.
hirrofic says
done ! thank you sir 馃榾
bentzion 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
John Moffat says
But then the total fixed costs would add up to 1.4M !!!
Nirmal says
Theory from this chapter is not important for the exam ?
John Moffat says
There is no theory involved in this.
shalinivv says
Awesome lecture Mr.John Moffat you explain so well, may god bless you……
sooner says
thank you johnmoffat. I appreciate.God’s blessings
John Moffat says
You are welcome 馃檪
sooner 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.
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.
Koungchenglong says
Yeah I do love this site. Thank for everything. The way you explain is very sensible. 馃檪
vivinash says
please where can i find accounting for labour????
John Moffat says
You can find a chapter on it in the course notes. The chapter should be understandable without the need for a lecture.
vivinash says
thank you.
Mark says
Hello i dont understand at 5:10 Why exactly do we divide, i dont get the theroy side to it
John Moffat says
We are trying to calculate the cost of 1 desk. If it costs $700,000 to make 50,000 units, then the cost of each unit is $700,000 / 50,000. There is no theory to it 馃檪
Mark says
Ahh, Okay Thank You 馃檪 I sometimes over think and complicate things – Thank You sir! :):D
Shrestha says
great thing
rubaiyat amir says
great job guys…. these site is just awesome….