Question 1a Costing

Jack Racer Ltd manufactures two types of bicycles (the BMX Bike and the Road Bike). Jack Racer Ltds current policy is to allocate indirect overhead costs using the traditional (absorption) method which uses one rate based on direct labour hours. You have been provided with the following information:

Indirect Costs	Cost
Rent	$3,160,000
Electricity	$2,700,000
Depreciation	$900,000
Supervisor Salaries	$1,400,000

	BMX Bike	Road Bike
Direct Labour hours used	80,000 hours	40,000 hours

Required:

1a) Calculate the indirect overhead rate using traditional (absorption costing). Show calculations.

Question 1b Costing

1b) Using the information available in Question 1a, calculate the overhead allocated to each type of product. Show calculations.