The business incurs the following costs for the next financial year:

Direct materials cost 65,000 Indirect materials 12,000 Direct labour time 30,000 hours Rent 18,000 Depreciation of equipment 54,000 Supervisors salaries 41,000 Design time costs (overheads) 34,000 Direct labour cost 450,000 Other miscellaneous indirect cost elements (overheads)9,000

The business has received an enquiry about a loft conversion. It is estimated that it will take 180 direct labour hours to complete. It will also require direct materials at 18,500.

The policy of the business is to charge a mark up of 70% on the cost of the job when charging customers.

The business normally uses a direct labour hour basis of charging indirect cost (overheads) to individual jobs.

Requirements: A. What will be the direct cost of converting the loft? B. What is the overhead recovery rate per hour?

C. What will be the full (absorption) cost of converting the loft?

D. What price should be charged to the customer?

QUESTION 3: BUNNY LTD (CHAPTER 4- FULL COSTING) - 4 marks The business incurs the following costs for the next financial year: Direct materials cost 65,000 Indirect materials 12,000 Direct labour time 30,000 hours Rent 18,000 Depreciation of equipment 54,000 Supervisors' salaries 41,000 Design time costs (overheads) 34,000 Direct labour cost 450,000 Other miscellaneous indirect cost elements (overheads)9,000 The business has received an enquiry about a loft conversion. It is estimated that it will take 180 direct labour hours to complete. It will also require direct materials at 18,500. The policy of the business is to charge a mark up of 70% on the cost of the job when charging customers. The business normally uses a direct labour hour basis of charging indirect cost (overheads) to individual jobs. Requirements: A. What will be the direct cost of converting the loft? B. What is the overhead recovery rate per hour? C. What will be the full (absorption) cost of converting the loft? D. What price should be charged to the customer