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Hi
Going through past papers, does anybody know where the figures for the absorption costing method of $90 & $157.50 (Fountain) and $15 & $26.25 (Goblin) come from? e.g.
for Goblin material overheads $720,000 (30% x $2.4m) / 28,000 units (4,000×7) = $25.71 why is answer $15?Thanks
Current basis:
2,400,000 x 30% = 720,000 (material)
2,400,000 x 70% = 1,680,000 (labour)Material:
Total budgeted material = 450 + 150 + 1,200 = 1,800,000
Material overhead/$material = 720,000/1,800,000 = 0.4
Using existing overhead absorption.
Goblin, material/unit = 150,000 x 4000 = 37.5
Material related overhead = 37.5 x 0.4 = 15
Fountain, material/unit = 450,000/2,000 = 225
Material related overhead = 225 x 0.4 = 90
Similarly for labour-related overheads
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