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A company manufactures two products L and M in a factory divided into two cost centres, X and Y. The following
budgeted data are available:
Cost centre
X Y
Allocated and apportioned fixed
overhead costs $88,000 $96,000
Direct labour hours per unit:
Product L 3·0 1·0
Product M 2·5 2·0
Budgeted output is 8,000 units of each product. Fixed overhead costs are absorbed on a direct labour hour
basis.
What is the budgeted fixed overhead cost per unit for Product M?For cost centre X:
Overheads = 88,000
Total hours = (8000 x 3) + (8000 x 2.5) = 44000
So the overheads per hour = 88000/44000 = $2You can do the same for cost centre Y and calculated the overheads per hour in that department.
To get the cost per unit for product M, you take 2.5 hours at $2 (for cost centre X) plus 2.0 hours at whatever you calculate for cost centre Y.
Then you have it 🙂Hope that helps 🙂
This helps a great deal.
my error was taking
total hours (8000 × 2) + (8000 × 2.5) = 36000
88000/36000 = 2.4
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