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The fixed production overhead absorption rate for pproduct y is $2.50 per direct labor hr. Ea unit of y requires 3 direct labour hrs. Inventory of product y at the beginning of the year was 200 uunits and at the end of the month was 250 units. what is the difference in the profits using the AC and MC method??
A cost centre uses a direct labour hour rate to absorb overheads. Data for the lastest period are as follows:
Budgeted overheard. $27760
Actual overheads. $23592
Actual direct labour hours. $4925
Overheads under absorbed. $937How many direct labour hours were budgeted to be worked during the period?
A. 4925
B. 5378
C. 5600
D. This cannot be calculated from the information provide@ Ravina
Ans:
Difference in profit = ( difference in inventory ) * ( Fixed OAR * direct labour hour )
= ( 250 – 200 ) * ( $2.50 * 3 )
= $ 375
absorbed overheads =23592+937
=24529
OAR =24529/4925
=4.9805
budgeted hr =27760/4.9805
=5573.74
approximately answer DAs we know that
AR = Budgted overhead /Budgeted activity level
we also know fOR under/over absorbtion we use this formula
AR * Actual activity level = (xxx)
Actual overhead = (xxx)
UNDER/Over= (xxx)
if in question they give us amount of actual overhead and there would also be under over absorption then we would do 2 step
1) for under we should subtract the amount of under overhead from actual over head to get the value of overhead on our actual activity level
2) for overr we should add the amount of over value of overhead from actual over head to get the value of overhead on our actual activity leve
now comes towards your question
A cost centre uses a direct labour hour rate to absorb overheads. Data for the lastest period are as follows:
Budgeted overheard. $27760
Actual overheads. $23592
Actual direct labour hours. $4925
Overheads under absorbed. $937AR * 4925 = 22655
Actual overhead = 23592
UNDER/Over= ( 937)
AR = 22655/4925
AR = 4.6
As we know that
AR = Budgted overhead /Budgeted activity level
Budgeted activity level = Budgted overhead/AR
Budgeted activity level = 27760/4.6
Budgeted activity level = 6035
is factory canteen always a cost centre?
in my answers book this statement is true.
sir kindly help me….A cost centre is anywhere you can map costs to. Therefore, the canteen can be a cost centre, as can research and development, production, warehouse, marketing etc.
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