Question

Company XYZ Sdn Bhd has two production departments; Department A and Department B. The company uses the basis direct labor hour to determine predetermine overhead rate. A total of 3 500 units were produced on Job 3113.

The following information relates to both departments for the year 2019:

	Department A	Department B
Budgeted manufacturing overhead	RM 500 000	RM 250 000
Budgeted direct labor hours	32 000	25 500
Budgeted machine hours	3 000	18 000

The company shows the following information relates to Job 3113:

Materials requisitioned                                  RM 20 000

Direct labor cost                                             RM 22 000

	Department A	Department B
Direct labor hours:	1 900 hours	1 100 hours
Machine hours:	1 500 hours	900 hours

                                   

Required:

Assume that, the company uses a plant-wide predetermined overhead based on direct labor hour. Calculate the total cost and the unit cost for Job 3113.

Answer 1

Calculation of plant wide predetermined overhead rate:

Overhead rate = Total budgeted Overheads / Total direct labor hours

= (RM 500,000 + RM 300,000) / (32,000 + 25,500) hours

= RM 800,000 / 57,500 hours

= RM 13.91 per hour

If it would have been departmental rates, then two overhead rates would be calculated for separate departments.

Calculation of total cost of job 3113

Materials cost RM 20,000

Labor cost RM 22,000

Overheads ( RM 13.91 per hour * (1900+1100) hours) RM 41,730

Total cost for the job RM 83,730

Number of units 3,500

Cost per unit RM 23.922857 per unit