Reference no: EM132598091
Nanda Ceramics Company manufactures three products M, N and O. The direct costs of three products are shows as below:
Information / product M N O
Budgeted annual production (units) 60,000 96,000 80,000
Direct Materials 140$/unit 180$/unit 120$/unit
Direct Labour ($ 20 per hour) 160$/unit 120$/unit 200$/unit
In addition to the above direct costs, the company incurs annual indirect production cost of $ 4,176,000. Overheads were allocated to product based on number of direct labor hours
Question 1: Compute the Total Amount of Direct Labour Hours used for making products M, N and O
Question 2: Compute the Overhead Absorption Rate (i.e. Total Overheads / Total Direct Labour Hours)
Question 3: Compute the Total Cost Per Unit for products M, N and O (Materials + Labour + Overheads)
Question 4: Explain briefly why over/under absorption of overheads occur? Provide examples to substantiate your answer