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Azure has a job order and the following data have been recorded on its job cost sheet: Direct material $50,000 Direct labour hours 1,000 Direct
Azure has a job order and the following data have been recorded on its job cost sheet:
Direct material $50,000
Direct labour hours 1,000
Direct labour wage rate $25
Machine hours 750 hours
Number of units completed 800
The company applies manufacturing overhead on the basis of machine hours and the predetermined overhead rate is $20 per machine hour. Management is now considering whether this job order is profitable or not and how does this job order fare compared to the industry benchmark.
Required
- Compute the unit product cost that would appear on the job cost sheet for this job. (2 marks)
- Using a mark-up percentage of 20% of the full product cost, how much profit/loss would this job make? (2 marks)
- Considering the industry benchmark for manufacturing overhead for similar jobs is 50% of direct labour, identify whether this job has a manufacturing overhead lower or higher than a similar job using the industry benchmark. Briefly explain what could cause a difference. (6 marks)
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