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Dear Tutor, can please teach me how to get the answer ?
Ali Pali Co is a small jobbing company. Budgeted direct labour hours for the current year were 45,000 hours and budgeted direct wages costs were $180,000.
Job number 34679, a rush job for which overtime had to be worked by skilled employees, had the following production costs.
Direct materials $ 2,000
Direct wages:
Normal rate (400hours) $2,000
Overtime premium $ 500
Production overhead $4,000Production overhead is based on a direct labour hour rate.
If production overhead had been based on a percentage of direct wages costs instead, the production cost of job number 34679 would have been :
Answer is $10,750
If you want for me to answer then you must ask in the Ask the Tutor Forum – this forum is for students to help each other.
Here’s the explanation.
If POH were to be a % of Direct Wages, then we’ll have to first calculate the Budgeted POH % of Budgeted Direct Wages. i.e.POH % = Budgeted POH/Budgeted Direct Wages
We have Budgeted Direct Wages but Budgeted POH is missing. For this, we can use the actual data.
POH = $4,000 for 400 hours
So, Budgeted POH/hr = $10
And Budgeted POH = $10 x 45,000 hrs = $450,000POH % = $450,000/$180,000 = 250%
Actual Direct Wages = $2,500 (incl. premium)
Production Overheads = $2,500*250% = $6,250Total Cost = $2,000 + $2,500 + $6,250 = $10,750
Sorry Sir John Moffat, next time I will pay attention.
Thank you Secondstar, i got u.
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