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Dear sir,
In relation to the question no 10 from Kaplan , I am confused on the way they have calculated the unit cost of the product under absorption method.
According to the question, total overheads 156000 ,no of units X,Y,Z ,1000,2000, 3000 respectively .Total labour hours 45000, each unit of each product takes the same number of direct hoursNow my question is why total overheads has been divided by total no of units instead of total number of labour hour ( labour hour is the basis of absorption)
Please help me to understand it
I don’t have the Kaplan Kit (only BPP).
However from what you have written, it is because each product takes the same number of hours per unit.
So you will get the same answer if you divide the overheads by the total hours to calculate the absorption rate per hour, and then multiply by the hours per unit to get the overheads per unit.
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