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Calculate overhead absorption rate per direct labour hour

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Reference no: EM132611529

Fencing Ltd, a small jobbing company, has the following budgeted figures for the coming year:

Direct materials sh.420,000

Direct labour sh.134,400

Factory overheads sh.120,000

Budgeted direct labour hours 16,000 hours

Budgeted machine hours 8,000 hours

Question (a) You are required to calculate:

(i) The overhead absorption rate per direct labour hour.

(ii) The overhead absorption rate per machine hour.

The details of a customer's Job No. 001 are as follows:

Direct materials sh.20,000

Direct labour hours 260 hours

Machine hours 170 hours

Required:

Question (b) Calculate the cost of Job No. 001 using the overhead absorption rate per machine hour.

Question (c) Calculate the cost of Job No. 001 using the overhead absorption rate per direct labour hour.

Question (d) Calculate the selling price of Job No. 001 to the customer using the labour overhead absorption rate (as calculated in (a) above and assuming a mark-up of 20% on cost)

Reference no: EM132611529

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