Question
2. A paint manufacturer produces specialist paints to meet customers specific requirements. Each customer order is manufactured as a separate job with production overheads allocated
2. A paint manufacturer produces specialist paints to meet customers specific requirements. Each customer order is manufactured as a separate job with production overheads allocated to it. Direct labour costs are high as every job requires mixing by hand. The management accountant has provided details of the budget and actual data for the company for the whole year as well as details of a particular customer order. 2022 budget 2022 actuals Customer order Production overheads 550,000 575,000 Direct labour hours 27,000 26,000 85 Machine hours 11,000 9,400 76 a) Why should direct labour hours be used to apportion the overhead? b) What direct labour rate is to be used to apportion the overheads? c) How much production overhead should be charged to the customer order? d) How much production overhead has been recovered in the whole year? e) How much is the over or under recovery for the year?
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