Reference no: EM132523654
A factory with three departments uses a single production overhead absorption rate, expressed as a percentage of direct wages cost. It has been suggested that departmental overhead absorption rates would result in more accurate job costs. Set out below are budgeted and actual data for the previous period, together with information relating to job no. 650.
Direct wages Direct labour hours Machine hours Production overheads
Budget:
Department
AN$ 25 000 10 000 40 000 N $ 120 000
B 100 000 50 000 10 000 30 000
C 25 000 25 000 - 75 000
Total: 150 000 85 000 50 000 225 000
Actual
Department
A $ 30 000 12 000 45 000 N $ 130 000
B 80 000 45 000 14 000 28 000
C 30 000 30 000 - 80 000
Total: 140 000 87 000 59 000 238 000
During this period job no. 650 incurred the actual costs and actual times in the departments as show below:
Direct Material Direct wages Direct labour Machine
N$ N$ hours hours
Department
A 120 100 20 40
B 60 60 40 10
C 10 10 10 -
- It is company policy that one-third of total cost is added to production cost to arrive at gross profit.
Required:
Question 1: Calculate the predetermined overhead rate (POR) using the current system 2
Question 2: calculate the production overheads charged to job no 650, and state the production cost and expected gross profit on this job.
Question 3: Compute departmental overhead absorption rates, using machine hours as basis for department A, and labour hours as basis for department B and C.
Question 4: Use the departmental overhead absorption rates and calculate the production overheads charged to job no. 657.
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