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Octam Ltd offers a complete interior design service for homes owned by wealthy individuals. The business has the following estimates for next month: (Click here
Octam Ltd offers a complete interior design service for homes owned by wealthy individuals. The business has the following estimates for next month: (Click here to view the estimate.) The business has received an enquiry about the interior design of a kitchen. It is estimated that it will take 140 direct labour hours to design and fit. It will also require materials costing 26,000. The business normally uses a direct labour hour basis of charging indirect cost (overheads) to individual jobs. 1. What will be the direct cost of designing and fitting the kitchen? 2. What is the overhead recovery rate per hour? 3. What will be the full (absorption) cost of designing and fitting the kitchen? All calculations to nearest pence. Data table Direct labour cost Direct labour time The direct cost of designing and fitting the kitchen = The overhead recovery rate per hour = The full (absorption) cost of designing and fitting the kitchen = Rent Depreciation of equipment Supervisors' salaries Heating, lighting and power Indirect materials 210,000 10,000 hours 15,000 9,000 22,000 11,000 3,000 Other miscellaneous indirect cost elements (overheads) 4,000 Direct materials cost Print Done 48,000 - X
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