Intermediate: Various overhead absorption rates and under/over recovery The following data relates to a manufacturing department for a period:

Job ZX was one of the jobs worked on during the penod. Direct material costing £7000 and direct labour (800 hours) costing £4000 were incurred.
Required:
(i) Calculate the production overhead absorption rate predetermined for the period based on:

(a) percentage of direct material cost;

(b) direct labour hours.
(ii) Calculate the production overhead cost to be charged to Job ZX based on the rates calculated in answer to (i)
above.
(iii) Assume that the direct labour hour rate of absorption is used. Calculate the under or over absorption of production overheads for the period and state an appropriate treatment in the "-CCOunls.
(iv) Comment briefly on the relative merits of the two methods of overhead absorption used in (i) above

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Budget data () Direct material cost 100 000 Direct labour cost 250 000 Production overhead 250 000 Actual data () 150 000 275000 350 000 Direct labour hours 50 000 hours 55 000 hours