Hi there,
in 3rd question, I think there is not enough information because to calculate we need the price of an hour.
A
Amman·
you have to divide the 400 with the 8 to get the hours worked
F
farah·
On the last question why did the answer ignore the materials?
It used when calculating the prime cost only.
J
John MoffatTutor·
The answer does not ignore the materials!!
M
mohomed·
this lecture is the best I am fully focussing on this lecture rather than my local lecture
J
John MoffatTutor·
Thank you for your comment :-)
J
Joseph·
Good day
Why does the actual fixed overheads differ from budgeted fixed overheads?
J
John MoffatTutor·
Because it is impossible to forecast exactly what will happen in the future.
M
Mannan·
are delivery costs to customers non-production overhead costs?
J
John MoffatTutor·
Yes
M
Michael·
Thank you Sir, got 75% had made a mistake on Q4 but I have rectified it. your lectures are simple and straightforward Thank you.
N
NAKATO·
Hello, still struggling to understand qn 3. Kindly take me through plz
J
John MoffatTutor·
It is very similar to an example that I work through in the lecture.
The number of hours that are worked in cost centre X are (8,000 x 3.0) + (8,000 x 2.5) = 44,000 hours.
The total overheads in cost centre X are $88,000.
Therefore the overheads per hours are 88,000 / 44,000 = $2 per hour.
In a similar way, the overheads in cost centre Y are $4 per hour.
Therefore the total overhead cost of product M is (2.5 hours x $2) + (2.0 hours x $4) = $13 per unit.
N
NAKATO·
Thanks much Sir.
Gat it now
A
Asif·
Hello sir,
If cost centre is also an item of equipment as per Q2, then what is the difference between an item of cost unit and an item of cost centre ?
J
John MoffatTutor·
Cost units are what we are producing.
A
Anishma·
Thank you Sir, for this amazing lecture. :)
A
Anishma·
And the free quizzes like this :)
J
John MoffatTutor·
Thank you for your comments :-)
A
Ashad·
I got 100%
N
NajibaSupporter·
Non-production overheads are absorbed at rate of 120% of prime cost: Prime cost= direct material+direct labour= 300+400=700, then 120% of 700 means 840. In general, non-production overheads are absorbed per labour hour or machine hour, etc since what the question specifies for a base. In this example, it mentions, absorption is based on the rate of prime cost, so you need to follow what the question says.
FYI:
Choosing the appropriate absorption base
The different bases of absorption are as follows.
? A percentage of direct materials cost
? A percentage of direct labour cost
? A percentage of prime cost
? A rate per machine hour
? A rate per direct labour hour
? A rate per unit
? A percentage of factory cost (for administration overhead)
? A percentage of sales or factory cost (for selling and distribution overhead)
J
jojo99·
I do not understand how you got 50 hours for #4?
P
Poon·
Total $400 direct labour and $8 per direct labour hour, divide it then you will get 50 hours
J
John MoffatTutor·
:-)
L
Lokesh·
100% Correct
D
Disha·
Sir can you please tell us the marks distribution as per the topic i. e Weitage as per topic for Exam?
J
John MoffatTutor·
The ACCA does not give weightages for each topic.
W
Waheedullah·
Q 3 is confusing
J
John MoffatTutor·
It is a past real exam question (and is similar to one of the examples that I work through in my free lectures) :-)
S
Safa·
i didnt understand the 3rd question. do i have to prepare a cost card in it?
J
John MoffatTutor·
No, the question just wants you to calculate the fixed overheads per unit for product M.
You need to calculate the overhead absorption rate for each of the 2 cost centres as I do in the free lectures, and then you can calculate the fixed overheads for product M.
in 3rd question, I think there is not enough information because to calculate we need the price of an hour.
It used when calculating the prime cost only.
Why does the actual fixed overheads differ from budgeted fixed overheads?
The number of hours that are worked in cost centre X are (8,000 x 3.0) + (8,000 x 2.5) = 44,000 hours.
The total overheads in cost centre X are $88,000.
Therefore the overheads per hours are 88,000 / 44,000 = $2 per hour.
In a similar way, the overheads in cost centre Y are $4 per hour.
Therefore the total overhead cost of product M is (2.5 hours x $2) + (2.0 hours x $4) = $13 per unit.
Gat it now
If cost centre is also an item of equipment as per Q2, then what is the difference between an item of cost unit and an item of cost centre ?
FYI:
Choosing the appropriate absorption base
The different bases of absorption are as follows.
? A percentage of direct materials cost
? A percentage of direct labour cost
? A percentage of prime cost
? A rate per machine hour
? A rate per direct labour hour
? A rate per unit
? A percentage of factory cost (for administration overhead)
? A percentage of sales or factory cost (for selling and distribution overhead)
You need to calculate the overhead absorption rate for each of the 2 cost centres as I do in the free lectures, and then you can calculate the fixed overheads for product M.