Full cost of a product A company manufactures several products, one of which is the Danthea. The factory has two production departments (machining and finishing) and one service centre (the canteen). Eighty per cent of the canteen costs are apportioned to the machining department and the rest to the finishing department. The overheads for the year were:

The following information is available for one unit of Danthea.

Indirect costs are absorbed from the production departments using a direct labour rate. 

Direct labour hours for the year were: 

• Machining department: 120,000 hours 

• Finishing department: 25,000 hours. 

All direct labour is paid at $8.00 an hour. 

a. Calculate the OAR for each production department. 

b. Calculate the full cost of one unit of Danthea.

Transcribed Image Text:

Machining 208 000 Finishing 72 000 Canteen 40 000