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Hi John!
I need your help, I have a problem with calculating general o/h absorption rate. In the solution it is calculated as 900,000/300,000=$3 per direct labour. Where from did they take 900,000 and 300,000.
And the second matter, is calculating annual direct labour hours for product 9000*10/60 = 1500 hours. Where 60 came from? why should we divide?
The 900000 is the overhead cost these overheads are actually heating lightning etc and absorbed on direct labour hours basis and the 300 000 are direct labour hours so 900 000/300 000 gives $3 per direct labour hour second matter is if u multiply 9000 by 10 you will get the ans in minutes so in order to convert it in hours you have to devide it by 60 cause there are 60 minutes in one hour 😀
I agree with the explanation above. I think 900000 and 300000 are all provided in the question itself.
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