AC Limited is a small company which undertakes a variety of jobs.

Budgeted Profit and Loss Statement: year ending 31st December, 19_6

An enquiry has been received and the production department has produced estimates of the prime cost and hours required for job A57.

Required:

(a) calculate by different methods six overhead absorption rates; (6 marks)

(b) comment briefly on the suitability of each method calculated in (a);
(8 marks)

(c) calculate cost estimates for job A57 using in turn each of the six overhead absorption rates calculated in (a).

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Sales Costs: Direct materials Direct wages 100 000 750 000 50 000 Prime cost 150 000 Fixed production overhead 300 000 Production cost 450 000 Selling, distribution and administration cost 160 000 610 000 Profit 140 000 Budgeted data: Labour hours for the year Machine hours for the year Number of jobs for the year 25 000 15 000 300