In: Accounting
A company manufactures four products using the same plant and processes.
The following information relates to a production period: -
Product |
Volume |
Material costs per unit |
Direct labour time per unit |
Machine time per unit |
Labour cost per unit |
A |
1,100 |
£7 |
30 minutes |
15 minutes |
£5 |
B |
2,000 |
£7 |
30 minutes |
15 minutes |
£5 |
C |
1,500 |
£16 |
120 minutes |
60 minutes |
£9 |
D |
3,950 |
£19 |
90 minutes |
90 minutes |
£9 |
Total production overhead recorded by the cost accounting system is analysed under the following headings:
Factory overhead applicable to machine-oriented activity |
£39,850 |
Set-up costs |
£4,180 |
The cost of ordering materials |
£1,900 |
Handling materials |
£7,680 |
Administration for spare parts |
£8,300 |
Investigation into the production overhead activities for the period revealed the following totals:
Product |
Number of set-ups |
Number of material orders |
No. of times material handled |
Number of spare parts |
A |
1 |
1 |
2 |
3 |
B |
8 |
3 |
6 |
10 |
C |
3 |
1 |
2 |
4 |
D |
8 |
5 |
10 |
8 |
You are required to:
Overhead Cost under Absorption Costing has been calculated using direct labour hours and machine hours as nothing was specified so kindly use the required one and ignore the other one.