Question
KLM Ltd manufactures a single product A.It has two production departments (cost centers) namely Department A and Department B. Information about the overheads allocated to
KLM Ltd manufactures a single product A.It has two production departments (cost centers) namely Department A and Department B. Information about the overheads allocated to these two departments (A&B) is given below:
Information Department A Department B
Total Manufacturing overheads $ 71,327 $ 50,756
Total Machine hours (estimated) 27,200 800
Total Direct Labour Hours (estimated) 6,800 18,000
KLM Ltd executes a job no. 847.The cost and output details of Job No.847 are given below:
Information Costs/hours details for Job No. 847
Direct Materials $ 487
Direct Labour $ 317
Number of machine hours used in Department A for Job no. 847 195 hours
Direct labour hours used in Department B for Job No. 847 102 hours
Production Department (A & B) overheads allocation to Job No. 847 will be as follows:
(a) Production Department A overheads will be allocated based on machine hours
(b) Production Department B overheads will be allocated using direct labour hours
Required
(1) Calculate overhead absorption rate for Production Department A and Production Department B allocation bases given above
(2) Ascertain the total cost of Job No. 847
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