Vable overhead costs indirect labour 16000

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Reference no: EM13592253

Under a contract with the provincial government, ChemLabs Inc. analyzes the chemical and bacterial composition of well water in various municipalities in the interior of British Columbia. The contract price is $26.00 per test performed. The normal volume is 10,000 tests per month. Each test requires two testing kits, which have a standard price of $3.60 each. Direct labour to perform the test is 10 minutes at $22.80 per hour. At normal volume, the overhead costs are as follows:

Variable overhead costs Indirect labour $16,000 Utilities 2,000 Labour-related costs 13,000 Laboratory maintenance 8,000 $39,000 Fixed overhead costs Depreciation 27,830 Supervisor 29,620 Base utilities 8,180 Insurance 1,700 67,330 Total overhead $106,330.

Overhead is allocated based on direct labour hours. During May 2012, 8,520 tests were performed. The records show the following actual costs and production data:

Activity Actual Cost Number of test kits purchased 19,050 $68,580 Number of test kits used 18,280 Direct labour 1,660 hours 37,210 Total overhead costs Variable 45,080 Fixed 68,150.Test kits are kept in inventory at standard cost. At the end of May, no tests were in process.Prepare a flexible overhead budget based on 80% of the normal volume.

Reference no: EM13592253

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