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Hi Sir Plz help with this question:
A company makes two products, reds and blues. Total fixed overheads to absorb during may are $60000. Budgeted production levels for reds for may are 10000 units. Twice as many blues and reds are to be produced. Each red takes I hour and each blue takes 0.25 hours. Overhead are to be absorbed on a labour basis.
What is the overhead absorption rate for each finished blue?
I assume that you mean twice as many blues AS reds are to be produced?
If so, then 10000 reds are budgeted to be produced and 20000 blues.
Total time for reds = 10000 x 1 hour = 10000 hours.
Total time for blues = 20,000 x 0.25 = 5,000 hours
So total time = 15,000So absorption rate = 60000/15000 = $4 per hour.
So for a blue it is .25 hours x $4 = $1 per unit
Which bit was causing the problem?
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