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Forums › ACCA Forums › ACCA PM Performance Management Forums › ABC practice questions

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.
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  • December 26, 2015 at 3:24 am #292742
    atique888
    Member
    • Topics: 20
    • Replies: 22
    • ☆

    Dear Sir,

    Could you please explain me because i could not understand the following calculations.

    It says General fixed overheads such as lighting and heating, which can not be linked to any specific activity and are expected to be $900,000 and these overheads are absorbed on a direct labour hour basis. Total direct labour hours for next year expected to be 300,000 hours.

    It also says that Linacre Co expects orders for Product ZT3 next year to be 100 orders of 60
    units per order and 60 orders of 50 units per order. The company holds no inventories of Product ZT3 and will need to produce the order requirement
    in production runs of 900 units. One order for components is placed prior to each production run. Four tests are made during each production run to ensure that quality standards are maintained.

    Calculations are as follows,

    $900,000/300,000 = $3/direct labour hour

    9,000/6 or 1,500 direct labour hours spent on manufacture (10 minutes per unit)

    1,500 hours/9,000 units x $3/unit = $0.50/unit

    9000 has been divided by 6. but i do not understand from where they got 6. please explain me full calculation.

    Kind Regards
    Chowdhury

    December 26, 2015 at 11:26 am #292753
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54684
    • ☆☆☆☆☆

    You have asked this question in the Ask the Tutor Forum also, and I have answered you there.

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