The following information relates to the activities of the production department of Clough Limited for the month of March 2012:

The company adds a margin of 50 per cent to the total production cost of specific units in order to cover administration expenses and to provide a profit.

Required:
(a) Calculate the total selling price of order number 123 if overhead is absorbed using the following methods of overhead absorption: direct labour hours; machine hours.
(b) State which of the two methods you would recommend for the productiondepartment.

Transcribed Image Text:

Production department Order number 123 20 25 Direct materials consumed (E)120000 Direct wages (8) Overhead chargeable (E) Direct labour hours worked Machine 180000 150000 30000 10000 hours operated 2