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Accounting Question 5bu M05 10.8 Key Factor - Hiring out Capacity vs New Product Launch Puhut hand Ltd has spare capacity in two of its
Accounting Question
5bu M05 10.8 Key Factor - Hiring out Capacity vs New Product Launch Puhut hand Ltd has spare capacity in two of its manufacturing departments - Department 4 and Department 5. A five day week of 40 hours is worked, but there is only enough internal work for 3 days per week so that 2 days per week (16 hours) could be available in each department. R Ltd has sold this time to another manufacturer, but there is some concern about the profitability of this week. The Accountant has prepared a table giving the hourly Operating Cost in each Department. The summarized figures are - Particulars Department 4 Department 5 Power Costs 40 60 Labour Costs 40 * 20 Overhead Costs 340 * 40 Total *120 * 120 he Labour is paid on a time basis and there is no change in the weekly wage bill whether or not the Plant is working at full capacity. The OH figures are based on the Firm's current OH Absorption Rates (Fixed and Variable) when the Departments are operating at 90% of full capacity (assume 50 weeks per annum). The Budgeted Fixed OH attributed to Departments 4 and 5 are 36,000 p.a. and 50,400 p.a. respectively. As a short-term measure, the Company has been selling processing time to another manufacturer, atStep by Step Solution
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