Question

DF Limited is a manufacturing company that carries out jobs to customers requirements in three production departments. The following data is available for Jobs A, B and C.

                                                                                    A         B         C

Bought in components                                             £248    £76      -

Direct material from stores                                       £312    £32    £96

Direct labour hours:  

             Machining                                                   12        18        15

             Assembling                                                  6          9        4

             Finishing and Spraying                                3        2        2

Hourly wage rates:

             Machining                             £12.00

             Assembling                            £8.00

             Finishing and Spraying          £6.00

Production overhead absorption rates per direct labour hour:

             Machining                            £26.00

            Assembling                           £21.00

             Finishing and Spraying       £25

Your cost estimates should include allowances for:

1.           20% of total production cost for administration overhead
2.           Profit of 12.5% on selling price.

Answer 1

	Particulars	A	B	C
	Bought in components	£    248.00	£      76.00	£             -
	Direct material from stores	£    312.00	£      32.00	£      96.00
	Direct Labour cost
	Machining (£12.00)	£    144.00	£    216.00	£    180.00
	Assembling (£8.00)	£      48.00	£      72.00	£      32.00
	Finishing and Spraying (£6.00)	£      18.00	£      12.00	£      12.00
	Production Overheads
	Machining (£26.00)	£    312.00	£    468.00	£    390.00
	Assembling (£21.00)	£    126.00	£    189.00	£      84.00
	Finishing and Spraying (£25.00)	£      75.00	£      50.00	£      50.00
	Total Production cost	£ 1,283.00	£ 1,115.00	£    844.00
	Add:Administrative cost @20%	£    256.60	£    223.00	£    168.80
	Total cost	£ 1,539.60	£ 1,338.00	£ 1,012.80
	Add: Profit @ 14.286%	£    219.94	£    191.14	£    144.69
	Selling price	£ 1,759.54	£ 1,529.14	£ 1,157.49
	Note:Profit of 12.50% on selling price represents 14.286% on Total cost calculated
	as follows.
	Selling price	100.00
	Profit	12.50
	Cost	87.50
	Profit % on cost = 12.50/87.50 = 14.286%