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Calculate the cost of job using the overhead absorption rate

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Reference no: EM132617726

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

Problem (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:

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

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

Problem (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: EM132617726

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