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Could someone please help me and let me know for the ABC calc – administration of production working how is the no. Of driver units 71,400? I’m so confused.
Admin is absorbed is absorbed as a general overhead. There are 3 labour hours per unit (last line of the question). The volume of units for September is 23,800 (first line of the Data for the year ended 30 September 2010).
Therefore, production hours = 3 x 23,800 = 71,400 and the admin overhead of $2,537,000 is divided over these hours to give an absorption rate of $35.53/hour. For the 16 units ordered the admin overhead absorbed will be 3 x 16 x 35.53 = $1,706