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A Co. Manufactures 2 products L & M in a factory dividede into 2 cost centres, X & y . The following budgeted data are available.
Cost Centre
X y
Allocated and apportioned fixed
Overhead cost$88,000 $96,000
Direct Labour Hours per unit
product L 3.0 1.0product M 2.5 2.0
Budgeted output is 8000 units of each product . Fixed overhead cost are absorbed on a direct labour hour basis.
Thank you for ur help in this question. I really tried was not able to come up with the answer of $13
You need to work out a cost per labour hour for each cost centre separately – not just an overall one.
So for X, the overheads are $88,000 and the total hours are (8,000 x 3) + (8000 x 2.5) = 44,000
So the overheads per hour for X are $88,000/44,000 = $2.Similarly, the overheads per hour for Y are 96,000/24,000 = $4
Then the cost per unit for M is 3 hours at $2 plus 2.5 hours at $4.
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