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Variable overhead cost is 1500000 of which 40% is related to storage and direct material and 60% is related to control and use of direct labour.
so we take
40% of variable overhead cost as material related overhead thats is S600000
60% of variable overhead cost as direct labour related over head that is $900000thn we devide it $600000/90000 total bulk portion. and we get $6.66
and we devide ir $ 900000/120000 total labour operations and we get 7.50 right?after this why we take again 40% of 6.66 and 60% of 7.50 when we calculate o.h cost per unit? because in bpp exam kit answer is given like
6.66×4/1=26.68 material related over heads for product A
7.50×6/1=45.00 Direct labour related Overheads for Product Awhy we take again 6.66 x 40%/1 ?
and 7.50x 60%/1?Could you please explain it to me?
I am away from home until Sunday evening and I do not have the BPP Kit with me.
However from what you have written, there is no point in taking 40% and 60% again.
If, for about the cost per about operation is $7.50, then to get the cost per unit for labour overheads then you multiply the number of operations per unit by the cost per operation of $7.50
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