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a company manufactures tow products X and Y, in a factory divided into tow production cost centres, primary and finishing, the following budgeted data are available :
cost centre:
allocated and apportioned fixed overhead costs : – primary $96,000 & finishing $82,500direct labour minutes per unit :
product x – primary 36 & finishing 25
product y – primary 48 & finishing 35budgeted production is 6000 units of product X and 7500 units of product Y
fixed overhead costs are to be absorbed on a direct labour basis
what is the budgeted fixed overhead cost per unit for product Y?
A $11, B $12 C.$14 D $15please help the calculation and thank you
First, you need to calculate the absorption rate per hour for each of the two departments separately.
So for “primary” it is $96,000 / ((6,000 x 36/60) + (7500 x 48/60)) = $10 per hour.
You can do the same for “finishing”.Then to get the cost per unit for Y it will be (48/60 x $10) + (35/60 x cost per hour for finishing).
It is exactly the same idea as example 3 in chapter 7 of the free Lecture Notes and the free lecture that goes with it.
hi sir, thank you for the reply
In fact, I was able to get the overheads absorption rate, but do not know how to calculate for budgeted fixed overhead cost per unit for product Y, whether it is important in this type of questions in exam ?
my working for OAR :
P
36×6000 units = 216,000
48x7500units = 360,000
total 576,000minutes / 60 minutes = 9600 hours
$96000 / 9600 hrs = $10
F
25x6000units = 150,000
35x7500units = 262,500
total 412,500/60=6875 hours therefore $82500/6875hours=$12now I able to know cost per unit : 48/60X$10=$8 and 35/60x$12=$7
therefore product y for P $8+for F $7=$15 the answer is D.$15
hi sir , what about if question ask total cost ?
thank youWhat do nearby total cost ? If you mean total cost per unit then you would be given materials, labour etc and then add them all up.
hi sir, thank you for your reply
I’m asked the total cost of my question, because in free lectures chapter 7- overheads – questions 5 to ask it but the question I think should be job costing and regret wrong to ask.Hi Mr. John
Can you please explain how you got the figure 60 in the first question.
Thank You!
The times are given in minutes and there are 60 minutes in an hour. So dividing by 60 gives the time in hours.
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