MAHelp needed with Absorption costing Question, please!

Hey,

well, I don't gurantee that the answer is correct, but here are my calculations.

Answer : D = $13

x y
L 3 1
M 2,5 2
---- ---
5,5 3 total hours for each cost centre.

Then you need to find how much overheads are allocated per each centre per hour. Use total hours that are shown above.
= total overheads per cost cetnre / total number of hours per cost centre

x = 88 000 / 5,5 = 16 000
y = 96 000 / 3 = 32 000

Then using that small table above find the number of hours for each product in each cost centre.
We only need product M , so use only it's data.
2,5 h in cost centre X and 2 hours in cost centre y.
Now multiply number for hours in each centre per relevant amount of overheads per hour.

M = 2,5 x 16 000 + 2 x 32 000 = 104 000
That is total amount of overheads allocated for all 8.000 units.

You need the number of overheads per unit, thus devide the amount of overheads above by number of units : 104 000 / 8 000 = $13

hope it helps :)

Thank you for the detailed explanation. You are right, I had the answer but no explanation. I could not get my head around this!