Q2

The following data relate to a manufacturing department for a period:

Budgeted data for the coming year are as follows:

Direct labour hours 60,000 hours

Machine hours 55,000 hours

Direct labour cost $110,000

Direct material cost $125,000

Production overhead $70,400

Actual data for the period are as follows:

Direct labour hours 55,500 hours

Machine hours 40,000

Direct labour cost $125,000

Direct material cost $150,000

Production overhead $67,800

Required:

1. Calculate the production overhead absorption rate predetermined for the period based on :

1. Machine hours;
2. Direct labour hours

2. Two pieces of furniture are to be manufactured for customers. Direct costs are as follows:

Job 123 Job 124

Direct material $15,400 $10,800

Direct labour 210 hours Dept. A @$16/ hour: 160 hours Dept. A @20/hour

120 hours Dept. B @$12/hour; 100 hours Dept. B @$18/hour

100 hours Dept. C @$14/hour; 140 hours Dept. C@$10/hour

Selling and administrative overheads for each job are 10% of factory cost.

Required:

(b) Calculate the total costs of each job using all the two bases in question (1) above.

(c) If the firm quotes prices to customers that reflect a required profit of 25 per cent on selling price, calculate the quoted selling price for each job.