The process plant division of a group of companies has built a food packaging machine to a
Question:
The process plant division of a group of companies has built a food packaging machine to a customer's requirements. A price of £49,000 had been quoted with the intention of achieving a profit of 25% on the selling price:
Production overhead is absorbed at the predetermined rate of £10 per direct labour hour in the Assembly Dept. and £15 per machine hour in the Machining Dept.
Commissioning costs, i.e. installation and initial running-in of the machine at the customer's site, were £750 and these are to be treated as a direct production cost.
Selling and general administration costs are charged to jobs at the rate of 33!/3% of production cost.
You are required to:
(a) Prepare a job order cost sheet and insert on it the information given above in such a way as to be useful to management.
(b) Explain 'job costing' and 'batch costing'.
Step by Step Answer:
