Can someone please explain how this question is solved.
A company produces two products – P and Q – that are both worked on in two departments – 1 and 2.
Each unit of P spends 1 hour in department 1 and 2 hours in department 2.
Each unit of Q spends 2 hours in department 1 and 2 hours in department 2.
The total budgeted production is as follows:
P 5,000 units
Q 10,000 units
The total budgeted overheads are as follows:
Department 1 $50,000
Department 2 $90,000
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MAF2 - Management accounting exam question
You have not said what the question is :-)
You have to work out how many hours are budgeted. So for department 1, there are 500o hours for P and 20000 hours for Q, so 25000 hours in total.
The overheads are $50000 so the overheads per hour are 50000/250000 = $2.
Then you can do the same way for department 2.
I am guessing that the question want the cost per unit for P or for Q. All you do then is charge there overheads at the rate we have calculated for each department.
Sorry, yes that was the question. Thank you
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