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A company produces a certain food item in a manufacturing process. On 1 November, there was no opening inventory of work in process. During November, 500 units of material were input into the process, with a cost of $9,000. Direct labour costs in November were $3,840. Production overhead is absorbed at the rate of 200% of direct labour costs. Closing inventory on 30 November consisted of 100 units which were 100% complete as to materials and 80% complete as to labour and overhead. There was no loss in the process.
8a.7 What is the full production cost of completed units during November?
The answer says that Labour and overhead cost is $11,520. Can I know how they arrived at the this cost?
Labour is 3,840.
Overheads are 200% x 3,840 = 7,680.
Therefore labour + overheads = 3,840 + 7,680 = 11,520.