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I have a question but I cann’t calculate with correct answer
Ali Co is a jobbing comapny. Budgeted direct labour hours for the current year were 45,000 hours and budgeted direct wages costs were $ 180,000
Job number 12345, a rush job for which overtime had to be worked by skilled employees, had the following production costs.
Direct materials $2,000
Direct wages
Normal rate (400hrs) $2,000
Overtime premium $500
Production overhaed $4,000
Total $8,500Production overhaed is based on a direct labour hour rate
If production overhaed had been based on a percentage of direct wages costs instead, the production cost of job number 12345 would have been
Because the overheads at the moment are based on about hours, it means they are charging at 4,000/400 = $10 per hour.
That means that the budgeted overheads would be 45,000 x $10 = 450,000.
This is 450,000/180,000 = 250% of budgeted wages.
Therefore if overheads were based on % of wages it would mean that the overhead charge for the job would be 250% x 2,000 = $5,000
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