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QUESTION 2: VENUS LTD You have been asked to suggest a method of deducing the full cost of various production orders of Venus Ltd. This

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QUESTION 2: VENUS LTD You have been asked to suggest a method of deducing the full cost of various production orders of Venus Ltd. This method will be used as a basis for setting prices. The production orders vary greatly in size and nature from one to the next. The following information has been taken from the budget for the forthcoming financial year: Direct labour hours 44,000 hours Direct Materials kg 22,000 kg Machine hours 35,000 hours Manufacturing costs: Power 220,000 Direct materials 308,000 Machine maintenance and repairs 115,000 Factory heat and light 35,000 Lubricants and cleaning materials 8,000 Direct labour 924,000 Depreciation factory buildings 600,000 Machinery Indirect labour 340,000 81,000 The business is not departmentalised for accounting purposes. All direct labour is paid the same hourly rate. The cost sheet for Order No 101 shows the following: Direct materials 650 kg Direct labour hours 920 hours Machine hours 800 hours Required: A Calculate overhead absorption rate (CAR) using direct labour and machine hour basis (1 mark) B. Prepare full costing for Order No 101 using overhead rate under machine hour basis and direct labour hour basis of allocation

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