Question

Elite Manufacturers makes jars to order and has the following budgeted overheads for the year, based on normal activity levels.

Department                Budgeted Overheads ($)         Overhead Absorption Base

A                                 30 000                                     5 000 labour hours

B                                 42 000                                     3 500 machine hours

C                                 45 000                                     3 000 labour hours

D                                 32 000                                     4 000 labour hours

Non-production overheads are 25% of production cost.

An order for 300 jars, made as batch 1000, incurred the following costs :

Materials                  $ 6 200

Labour                      150 hours in Department A at $ 6.50 per hour   

500 hours in Department B at $7.00 per hour  

140 hours in Department C at $8.00 per hour   

160 hours in Department C at $6.00 per hour

Special Design cost for batch $800.

850 machine hours were worked in Department B.

Required:

1. Calculate the budgeted overhead absorption rate for each department               
2. Calculate the total cost of the batch                                                          
3. Calculate the cost per unit of batch 1000                                                  (2 mark)
4. Calculate the profit per unit, assuming that the selling price was $190per unit
5. Describe three major source documents used in job costing and the purpose of each

(6 marks

Answer 1