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Hii all
i ‘m usinng BPP study text i have difficulting in calculating under absorbed overhead (4.3)
Budget overhead is $80000 , budget activitiy is $40000 direct labours , $2 per direct labour, Actual Overhead is $84000 & $45000 direct labour ,total Production Overhead is $176533 , Actual labour Hours for mashine A is 8200 , Machine B Is 6500 & assembly 21900 , Machine Usage Hrs for Machine A is 7300 ,Machine B – 18700 & Assembly is 0….how they have calculated Machine A $7.94 per hrs & B $3.50 , Assembly $2.24hey, When calculating the overhead absorption rate we use budgeted activity and not actual,then when absorbing thats when we multiply the absorption rate by the actual activity. The machine hours attributable to machine shop A is 7200 and machine shop B is 18000. Those figures are actual,not budgeted,so for shop A $57168 divided by the machin hrs attributable to this shop which is 7200hrs,and therefore gives us $7.94per machine hour.for shop B $63000 divided by machine hours attributable to this shop only 18000 and gives us $3.50 per machine hour. And lastly assembly which is not done by machines but people, so we will use labour hours which is 20800,so we divide the total cost of assembly which is $46592 by its labour hours of 20800,hence giving us $2.24 per direct labour hours. Hope you got it now
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thanks niv…. now i got it ..thanks for help buddy:)
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