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Dear All,
Could you please explain how the budgeted fixed overhead cost per unit for Product M, should be counted in Question 4 of the Test in Chapter 7??
Cost center X and Y, allocated and approtione fixed costs:
X 88000; Y 96000
Dierect labour hours per unit
Product L 3.0 1.0
Product M 2.5 2.0I will really apprecaite your help in this matter.
Yhank you very much in advance!!
AgnesFirst calculate the absorption rate for each cost centre.
So for X, the budgeted hours are (8000 x 3.0) + (8000 x 2.5) = 44,000 hours.
So the absorption rate for X is 88,000/44,000 = $2 per hour.So the same also for Y.
Then for the overhead cost for product M is 2.5 hours at $2 per hour, plus 2 hours at the rate you get for centre Y.
(and you can of course check your answer at the back of the course notes)
Dear Mr John,
I understand now this example, however the next one, seems to be another brdige for me.
A company operates a job costing system. Job number 1203 requires 300$ of direct materials and 400$ of direct labour. Direct laour is paid at the rate of 8$ per hour. Production overheads are absorbed at the rate of 26$ per direct labour and non-production overheads are absorbed at the rate of 120% of prome costs.
What is the total cost of job number 1203?Could you please help and explain how it sould be calculated?
Thank you in advance!
The number of labour hours is 400/8 = 50 hours.
Materials are 300 and labour is 400, so a total so far of 700.
Production overheads are 26 per hour, so 50 x $26 = $1300.
Non-production overheads are 120% x (300 + 400) = 840.
So the total cost = 300 + 400 + 1300 + 840.
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