Reference no: EM13341172

Question

Full Costing

Asterixis a business that prints customised pens for corporate events. It has been decided by the management that the pricing of customer orders will be based upon the plans for the next financial year. The plans for the 2015 financial year are shown below:

$

Sales revenue 163,000

Direct materials (28,000)

Direct labour (21,000)

Variable overheads (12,000)

Advertising and marketing (2,000)

Depreciation of equipment (3,000)

Administration expenses (24,000)

Interest on loan (1,200)

Profit 71,800

Asterix needs to prepare a quote for a customer for an order of pens and has made the following estimates for the direct costs of the job:

Direct materials $1,500

Direct labour $1,100

Required:

(a) Prepare a quote for the customer using direct labour costs to apportion overheads and profits. Show all workings.

(b) What assumption does the customer quote in part (a) make regarding the variable overheads of the business?

(c) Describe an alternative method that Asterix could have used to apportion overheads and profits.