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Accounting for Overheads

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Accounting for Overheads

  • This topic has 5 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • March 1, 2015 at 5:53 pm #230922
    sooner
    Member
    • Topics: 9
    • Replies: 19
    • ☆

    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 1.0

    product 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

    March 2, 2015 at 8:41 am #230950
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    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.

    March 2, 2015 at 6:09 pm #231000
    sooner
    Member
    • Topics: 9
    • Replies: 19
    • ☆

    Thank you Mr Moffat

    Did u mean 2.5hrs x$2=5.
    2hrsx$4=8.

    Ans $13.

    Am I correct.

    March 2, 2015 at 9:36 pm #231015
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    Sorry – yes, that is what I meant 🙂

    March 2, 2015 at 10:40 pm #231023
    sooner
    Member
    • Topics: 9
    • Replies: 19
    • ☆

    No problem .THank you once again.

    March 3, 2015 at 7:44 am #231046
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    You are welcome 🙂

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