1. Greenstone (P) Ltd has been incurring two types of overhead costs- material handling and quality inspection. The costs expected for these categories for the coming year are as follows:

Material handling Rs. 25,00,000

Quality inspection Rs. 75,00,000

The company currently charges overhead using direct labour hours and expected actual capacity. This figure is 50,000 direct labour hours.

The factory manager has been asked to submit a bid and has assembled the following data concerning the proposed job.

Job

Direct Materials Rs. 1,07,000

Direct labour (2,000 hours) Rs. 1.05,000

Number of material moves 20

Number of inspections 10

The manager has been informed that many competitors use an ABC approach to assign overheads to jobs. Before submitting his bid for the proposed job, he wants to assess the effects of this alternative approach. He estimates that the expected number of material moves for all jobs during the year is 2,500. He also expects 15,000 quality inspections to be performed.

Required:

• Compute the total cost of the proposed job using direct labour hours to assign overhead.