Intermediate: Various overhead absorption rates AC Limited is a small company which undertakes a variety of jobs for its customers.

An enquiry has been received, and the produc¬ tion department has produced estimates of the prime cost involved and of the hours required to complete job A57.

You are required to:

(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 Cost: Direct materials Direct wages Budgeted profit and loss statement for the year ending 31 December () () 750 000 100 000 50 000 150 000 Prime cost Production cost Fixed production overhead 300 000 Selling, distribution and administration cost 450 000 160 000 Profit 610000 140 000 Budgeted data: Labour hours for the year 25 000 Machine hours for the year Number of jobs for the year 15000 300