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Hi John,
For question 2 in the calculation which 250,000 is used to arrive at 750,000
Is it the given factory overhead cost 250,000
Or machine time 5,000hrs /0.2hrs = 25,000units x$10 = 250,000?Why isn’t it both, I thought all costs apart from materials is included in cost per factory hour?
Many Thanks
The total factory cost is the total of all costs apart from materials, and so is the labour cost (100,000 x $5) plus the overheads ($250,000).
Machine costs are an overhead and so are already included in the 250,000 (and you are not given the cost of machine time separately anyway!).
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