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SECTIONC Choose ONE question from this section Question 9 Tolad Ltd manufactures jobs as per customers' orders. It has prepared the following budget for the
SECTIONC Choose ONE question from this section Question 9 Tolad Ltd manufactures jobs as per customers' orders. It has prepared the following budget for the month ending 31 July 2019: Direct Material 125,000 Direct Labour: Skilled (6,400 hours) 48,000 Semi-skilled (5,600 hours) 30.800 78.800 Prime Cost 203,800 add Factory Overheads: Department A 23,680 Department B 36,400 60.080 Cost of Production 263,880 add Administrative costs 52.776 Total Cost 316,656 An enquiry has been received for a Job with reference No. RM 24 to be manufactured during the month of July 2019. The following details have been estimated: Direct material: Material : Mixed components at a cost of 240. Material Y: 360 kgs @ 8/kg at list price (before trade discount). Material z: 72 metres 10 at list price (before trade discount). A 15% trade discount is applied to list prices of materials Y and Z. The cost of transporting all materials to be used for Job RM 24 is expected to be 250. During the preparation stage a 10% loss is expected from materials Y and Z. The above quantities are the quantities at completion stage. Direct Labour Hours: The company operates a bonus system where employees are paid a bonus equal to half the time saved. The bonus paid is included as part of the direct labour cost charged to the customer. The labour hour details of the job are: Question continues on next page Time Allowed Actual Time Grade of Labour Skilled Semi-skilled (Hours) 230 180 (Hours) 210 160 Direct labour costs are based on budgeted hourly rates. Overheads Factory overheads are absorbed by the departmental direct labour hour rates. Production overheads are charged to jobs in line with the labour details passed to the customer. Administrative costs are absorbed on a % of the cost of production. Selling prices are based on a 25% mark-up. 1. Required: A detailed statement calculating the total cost of the Job RM 24. (18) Calculate the price to be quoted to the customer. (3) Explain what you understand by Job Costing' and state where this method of costing might be used successfully ii. (Total: 25 marks)
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