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Hi how do you answer this question? I’m confused how to find the total overheads and then find 40% of it?
Company A bases its estimates on the following formula:
Total cost = Prime cost + 40% overhead
Selling price = Total cost + 25% profit
Estimates for two jobs show
Job X Job Y
£ £
Direct materials 200 100
Direct wages ?5 per hour 500 600
Prime cost 700 700
Calculate the selling price of each job. Is this the best way to absorb overhead?In future you must ask in the Ask the Tutor Forum is you want me to answer – this forum is for students to help each other.
I think that either the question is badly written in your book or else you have copied it wrongly.
It has to mean that they add 40% to the prime cost so as to cover the overheads. So the total cost of Job X is 700 + (40% x 700)
You must surely have an answer in the same book in which you found the question, so does the answer not show the workings?
Hi, this question is from a lecture slide in my course and I cannot get the solution as of now. Unfortunately the layout of the question I wrote changed after posted the question so I have typed it out again below. I have checked and the information was presented this way.
Company A bases its estimates on the following formula:
Total cost = Prime cost + 40% overhead
Selling price = Total cost + 25% profitJob X (in £)
Direct Materials
200
Direct Wages (£5 per hour)
500
Prime Cost
700Job Y (in £)
Direct Materials
100
Direct Wages (£5 per hour)
600
Prime Cost
700Calculate the selling price of each job. Is this the best way to absorb overhead?
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