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

Budgeted profit and loss statement for the year ending 31 December 1986

An enquiry has been received, and the production 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; )

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

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

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Sales Cost: Direct materials Direct wages () 100000 50 000 () 750 000 Prime cost 150000 Fixed production overhead 300 000 Production cost 450 000 Selling, distribution and administration cost 160000 610000 Profit 140 000 Budgeted data: Labour hours for the year Machine hours for the year Number of jobs for the year 25000 15000 300