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ques: K Ltd makes two products. Information regarding one of those products
is given below:
Budgeted output/sales for the year: 900 units
Standard details for one unit
Direct materials 40 square metres at $5.30 per square metreDirect wages Bonding department: 24 hours at $5.00 per hour
Finishing department: 15 hours at $4.80 per hour
Variable overheads $1.50 per bonding labour hour
$1 per finishing labour hour
Fixed production overhead $36,000
Fixed non-production overhead $27,000
Note: Variable overheads are recovered (absorbed) using hours, fixed
overheads are recovered on a unit basis.….now my question that we are to solve this question in the normal way and I get it but what about those lines mentioned for var. o/h ($1.50 per bonding labour hour
$1 per finishing labour hour)
I am confused what is the purpose of these lines?The total standard cost per unit is the total of the materials, labour, variable overheads, and fixed overheads per unit.
Given that each unit takes 24 hours of bonding labour, the variable overheads per unit in bonding must be 24 hours multiplied by $1.50. In addition, since each unit takes 15 hours in finishing, there are finishing variable overheads of 15 hours at $1 per hour.
Thank you, John. It was a really silly question on my part. Nonetheless thank you so much.
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