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Grindstones currently produces two products, the stone and the camp. It currently uses a standard absorption costing system to calculate inventory values and cost of sales. It has upto now used a labour hours basis to ansorb fixed production overheads into the cost of production. Budgeted data relating to the company’s teo products is as follows.
Stone campo
Material cost/unit $450 $550
Direct labour cost/unit $1.250 $635
Labour rate/hour $25 $25
Prduction & sales volume$14000 $12500What is the OAR per unit for each product using traditional absorption costing?
Stone Campo
A. $1250 $625
B. $2500 $1250
C. $4200 $2425
D. $1300 $675Please don’t simply set me a test question and expect me to produce an answer.
Unless this was set to you as a test, you must have an answer in the same book in which you found the question. So ask me whatever it is in the answer that you are not clear about and then I will help you.
I assume you have watched my free lectures on this? If you have then you should not really have a problem with the question.
The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
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