QUESTION 4

The following information is available for Pooch Ltd:

Direct materials	45,000
Direct labour	20,000
Direct Expenses	15,000
Indirect labour	6,100
Depreciation	3,400
Rent and Insurance	2,500
Other	8,000
Total machine hours	2,000
Total direct labour hours	5,000
Mark up	50% on full cost

Job X20
Direct labour	4 hours
Direct Materials	3kg @ 16 per kg
Direct Expenses	16 per unit
Machine hours	2 hours

1. How is process costing different to job costing?
2. Calculate the selling price of Job X20 using Traditional Absorption Costing.
3. What is the use of an OAR?
4. Suppose that the ABC full cost of Job X20 was 5% higher than your calculation in part 4a) discuss the companys strategic options.
5. As a manager, discuss which method of costing you would use to set regular selling prices.