Job, Batch and service costing. — OpenTuition Forums

SSaiful5y ago

I need help with this question, a breakdown explanation would be great. -------------------------------------------------------------------------- Aji pali Co is a small jobbing company. Budgeted direct labour hours for the current year were 45,000 hours and budgeted direct wages costs were $180,000. Job number 34679, a rush job for which overtime had to be worked by skilled employees, had the following production costs. Direct materials $2000 Direct wages: Normal rate (400 hrs) $2,000 Overtime premium. $500 Production overhead. $4000 _________ $8,500 Production overhead is based on a direct labour hour rate. If production overhead had been based on a percentage of direct wages costs instead, the production cost of job number 34679 would have been: o $5,500 o $10,250 o $9,000 o $10,750 (2 marks)

John MoffatTutor5y ago#1

I am puzzled that you are asking this because presumably you are using a Revision Kit from one of the ACCA Approved Publishers (which you certainly must be doing), in which case you would already have an answer and the workings for it :-) Currently the overheads is absorbed on labour hours. So the absorption rate is $10 per hours and the total budgeted overheads are therefore 45,000 x $10 = $450,000. If we absorb instead as a % of the direct wages, then it is 450,000/180,000 = 250% of direct wages. Therefore the amount absorbed into the job will be 250% x 2,500 = $6,250 So the total cost will be $10,750

SSaiful5y ago#2

Thank you so much Mr.John Moffat, I could not understand the answer provided by the BBP Text Book, you explained it so much better, thank you.

John MoffatTutor5y ago#3

You are welcome :-)

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