Assume that the machining department overheads (in Example 10.4) are to be charged to jobs on a machine hour basis, but that the direct labour hour basis is to be used for the other two departments. What will be the full (absorption) cost of a job with the following characteristics?

This should be tackled as if each cost centre were a separate business, then departmental cost elements are added together for the job so as to arrive at the total full cost.

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Preparation Machining Finishing Direct labour hours Machine hours 10 7 5 6 Direct materials () 85 13 6