.18 Various overhead absorption rates and under- over-recovery The following data relate to a manufacturing department for a,period: Budget data (E) Actual data (E) Direct material cost 100000 150 000 Direct labour cost 250000 275000 Production overhead 250 000 350000 Direct labour hours 50 000 hours 55 hours Job ZX was one of the jobs worked on during the period. Direct material costing 27000 and direct labour (800 hours) costing 24000 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. (3 marks) (ii) Calculate the production overhead cost to be charged to Job ZX based on the rates calculated in answer to (i) above. (2 marks) (iii) Assume that the direct labour hour rate of absorptio is used. Calculate the under- or over-absorption of production Overheads for the period and state an appropriate treatment in the accounts. (4 marks) (iv) Comment briefly on the relative merits of the two methods of overhead absorption used in (i) above. (6 marks) AAT Cost Accounting and Budgeting 4.19 Calculation of product overhead costs Bookdon Public Limited Company manufactures three products in two production departments, a machine shop and a fitting section; it also has two service departments, a canteen and a machine maintenance section. Shown below are next year's budgeted production data and manufacturing costs for the company.