Reference no: EM132618871

Unga ltd manufactures office and household furniture to customers' specifications. Because of the specialized nature of the manufacturing process, each job is treated separately for costing purposes. There are two stages in the manufacture of each item namely, Assembly and Finishing. In the assembly department, overheads are absorbed on the basis of prime cost incurred in that department. In the finishing department, overheads are applied on the basis of total accumulated cost on the job in both the two stages inclusive of overhead absorbed in assembly. The selling price of the item is then determined by applying the usual 40% profit margin.

The following information is provided about budgeted data for the next financial period:

                                   Assembly                        Finishing

Materials ksh.             480,000                        300,000

Overheads ksh.            594,000                      418,500

Labor cost ksh               180,000                   120,000

Labor hours                    3,000                          1,500

Required:

Problem a) Calculate the overhead absorption rates for each production process. 

Problem b) Job no. 148 shows the following data concerning its production:

                                 Assembly                   Finishing

Materials shs.                  5,000                   3,500

Labor cost shs.               2,700                    1,600

Labor hours                        12                   4

Required:

Prepare the cost statement for this job and indicate the proposed final selling price.